Good Quarter for ServiceNow as Sales Execution Shines and Foreign Exchange Worsens; FVE to $640

On a constant-currency basis, ServiceNow reported upside relative to guidance for its third quarter. Currency headwinds continued to worsen, which pushed reported results below our expectations. Guidance was also below our model, although once again currency is the culprit. While we view the quarter as good overall—and very good in the current environment—we have lowered our near-term estimates to account for reported results and guidance and are therefore reducing our fair value estimate to $640 per share from $675. Despite this, we view the stock as attractive. We continue to favor ServiceNow as one of our top picks for its long-term organic-driven growth as it leverages its strength in workflow automation to bring its existing customers more deeply into IT and more broadly with human resources and customer service-specific products, as well as its continued push into industry segment-specialized versions.