Analyst Note| Dan Romanoff, CPA |
Wide-moat ServiceNow delivered good results again, including upside to headline numbers, and provided better guidance for both revenue and non-GAAP operating margins for the first quarter. Sales execution remains a bright spot, especially in the face of the ongoing pandemic and the new virtual selling reality. Our view that digital transformation efforts are being pulled forward as firms’ IT infrastructures have often been exposed as insufficient in the current remote work environment has been reinforced again. We believe results continue to support our thesis centering on the company’s land and expand strategy. ServiceNow continues to leverage its strength in workflow automation to penetrate existing customers more deeply in IT and more broadly with HR and customer service specific products. We maintain our wide moat and after rolling our model and filtering results and guidance through our forecast, we are raising our growth and profitability assumptions, and along with it, our fair value estimate to $573, from $440. We see shares as slightly undervalued.