“ServiceNow, Inc. (NOW $34 NYSE) is taking IT automation into the Cloud. ServiceNow’s Cloud-based software works across operating systems, servers, networking equipment, PCs, mobile devices and other technologies, allowing IT professionals to facilitate workflow automation, data consolidation and business administration processes. The company is the unrivaled leader in the IT automation field, with more than 1,500 enterprise-level customers and an impressive 98% renewal rate.
“Soaring demand forced ServiceNow to more than double the number of employees in 2012, following a whopping 880% increase from 2008-2011. Revenues have been soaring with fiscal 2012 fourth-quarter revenue up 92% to $75.2 million, and 2013 guidance topping analyst expectations. For fiscal 2013, ServiceNow expects full-year revenue of $387-$392 million, well above analysts’ estimates of $368 million. With CEO Frank Slootman recently estimating that ServiceNow holds a 12% share of the IT Service Automation market, it is clear that the company has ample room to continue its rapid growth, which could translate into potentially significant returns for investors.
Technical Analysis
“When NOW went public in June 2012, the IPO market was a wasteland, with investors shying away from new issues in the wake of a botched Facebook IPO more than a month earlier. Yet, as a testament to the company’s strength and savvy, NOW soared more than 37% in its first day of trading. The stock went on to peak near 42 in October before succumbing to selling pressure. NOW finally bottomed near 25 in January before turning sharply higher in 2013.
“As a result, NOW appears to be on the upswing portion of a bullish cup formation. Shares are currently consolidating their recent gains near 36, paced by support at their 10-day moving average. With the upper bound of the cup formation near 40-42 (which could result in a handle and another breakout), NOW has plenty of room to run for the time being. We recommend buying on weakness, with a stop near 33. Suggested Buy Range: 35-36. Cabot’s buy range is valid for two weeks.”
- Michael Cintolo, Cabot Top Ten Trader, March 18, 2013