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ServiceNow Inc NOW

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Morningstar’s Analysis

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ServiceNow Introduces $15 Billion in Organic Revenue Target at Analyst Day; FVE Steady at $587

Dan Romanoff, CPA Equity Analyst

Analyst Note

| Dan Romanoff, CPA |

Wide-moat ServiceNow covered a range of topics at its virtual investor day on May 10, including a look into some product areas, the innovation pipeline, thoughts on the company’s competitive position, market size--all in the context of financial metrics. ServiceNow also announced the acquisition of Lightstep, a provider of application monitoring and observability. While no terms were disclosed, we view the deal as a bolt-on technology driven acquisition. Management maintained repeatedly that ServiceNow is an organically driven company. Overall we believe the event served as an exclamation point on our thesis, which centers on the company’s land-and-expand strategy of upselling into customer service and HR, industry vertical solutions, and higher priced Pro and Enterprise versions--all while generating a strong margin profile. We maintain our $587 per share fair value estimate and see the stock among our top picks in software with its valuation increasingly attractive.

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Company Profile

Business Description

ServiceNow Inc provides software solutions to structure and automate various business processes via a SaaS delivery model. The company primarily focuses on the IT function for enterprise customers. ServiceNow began with IT service management (ITSM), expanded within the IT function, and more recently directed its workflow automation logic to functional areas beyond IT, notably customer service, HR service delivery, and security operations. ServiceNow also offers an application development platform as a service (PaaS).

2225 Lawson Lane
Santa Clara, CA, 95054
T +1 408 501-8550
Sector Technology
Industry Software - Application
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Speculative Growth
Employees 13,096