Main example of relative strength ›sharedeals.de

According to technical analysis, investors should always pay attention to stocks with the highest relative strength in the short term. But how do you explain to novices what exact relative strength means? Well, if the market hardly falls during the weak market phase or only falls in the entire market, then the share is relatively strong, but it can rise above average during the strong market phase. In this way, ServiceNow (NYSE: ServiceNow), which recently released the latest quarterly figures, is actually a typical example of relative strength.

Because if you look closely at the chart, you will not only notice that the share shows a long-term upward trend, so it is also close to its highest level in history. On the contrary, at the end of last year, when the entire market was under tremendous sales pressure, it only lags behind the entire market. Nasdaq fell by about -20%, and many Goofy flyers halved, but the stock fell by less than -25%, only slightly above the leading index.

Therefore, let us take a look at the long-term business development of Glidesoft, a cloud software expert established in 2003. ServiceNow’s annual turnover between 2015 and 2018 increased by a staggering 160% or approximately +37.4% to $2.61 billion. Although the group’s net profit in any fiscal year is not enough, the net loss is only about 26.7 million US dollars, but the group is now close to break-even.

Better than expected quarterly data and very good prospects, but…

In the second quarter of 2019 as of the end of June, ServiceNow’s quarterly sales were US$833.9 million (a growth of approximately 32.1% from the second quarter of 2018) and a net loss of US$11.1 million or 0, US$06 per share. After adjustment, however, this is enough to generate earnings of $0.71 per share. As a result, ServiceNow exceeded analysts’ revenue and earnings expectations (revenue expectations: $832.1 million; earnings expectations: $0.63 per share (adjusted).

Management also knows how to convince their own opinions. Sales in 2019e are expected to be between US$329 million and US$3.3 billion, and the current third fiscal quarter is expected to reach US$836 to 841 million. So far, analysts have only calculated annual sales of $3.25 billion in 2019. They are also more cautious about the current third fiscal quarter and expect average quarterly sales to be only $833.4 million.

Despite this, the stock dived initially, and there was basically no real reason. The situation has been so good recently that some investors are profiting here. But at the same time, this small gap was almost completely erased. Basically, I can understand both sides well, that is, the longs and shorts between investors.

ServiceNow helps other companies enter the cloud environment…

The police and the bear market-which view is correct here?

The bears may argue that the company is growing strongly, but even according to management’s forecast for 2019, the share is now more than 16 times the sales multiple. Although it may be normal now in the US high-tech field, it is of course very high. As long as the Fed injects money into the market, investors will buy stocks-of course, this is undoubtedly the first choice for strong growth companies like ServiceNow.

But, of course, the police also have good arguments. On the one hand, central banks around the world hope to open their currency locks again, which, in principle, should push stocks to rise further. In addition, ServiceNow has grown so fast that its annual turnover is currently doubling every 26 months. In addition, ServiceNow is close to break-even and can easily reach break-even when necessary. In addition, the group has no net debt, so the balance sheet looks pretty solid.

The user interface of the software in ServiceNow

Conclusion: Speculators take advantage of frustration!

All in all, it must therefore be pointed out that speculative investors should continue to receive any price weakness for the stock. Because ServiceNow can once again use its quarterly data to persuade, it is still on a strong growth path. Compared with other high-tech companies, even if the initial astronomical KUV 2019e is about 16, it does not seem so ridiculous anymore.

In terms of chart technology, the situation is still clear. From a long-term perspective, the stock has shown an uninterrupted upward trend and has only recently shown high relative strength. In order for the technical side to be completely optimistic, the only thing missing now is to jump to a record high, for which the share must continue to climb above US$300. However, at present, this price increase seems to be only a matter of time. After completion, the target price of the title will be as high as $360!