Up 76%, ServiceNow inventory is too high

It has risen 76% since March 23, ServiceNow inventory (New York Stock Exchange: now) Based on multiples of historical sales prices (P/S), it seems that the near-term potential has been reached. ServiceNow is a platform as a service (PaaS) provider that helps its customers automate IT business management. The company’s stock price rose from its recent lowest point from $255 to $449, while S&P’s stock price rose by about 50%. Because investors are generally optimistic about companies that provide cloud-based solutions, the stock is in a leading position in the overall market. In addition, its stock price is up 59% from the level at the end of 2019.

As the coronavirus outbreak has become a pandemic, ServiceNow’s stock price has exceeded its level before it fell in February. This seems to make it fully valued, because in reality the Covid-19 pandemic will cause demand and income damage.

In the past two years, this growth was partly due to ServiceNow’s revenue growth of approximately 80% from 2017 to 2019. In addition, it was able to increase its net income from -116.8 million US dollars in 2017 to 626.7 million US dollars in 2019.

In recent years, the company’s revenue has grown steadily, and its P/S multiple has also increased. We believe that after the recent rise and the potential weakness caused by the recession caused by the Covid outbreak, the stock is unlikely to see a sharp rise.Our dashboard What caused the 244% change in ServiceNow, Inc.
The stock now from 2017 to the present? There are basic figures.

ServiceNow’s price-earnings ratio has changed from approximately 12 times in 2017 to 15 times in 2019. Although the company’s price-to-earnings ratio is now about 24 times, there is a downside risk in comparing the current price-to-earnings ratio with the levels of the past few years – the P/S value was 15 times at the end of 2019 and 12 times at the most recent end of 2018.

So what are the possible incentives and timing for the downside?

ServiceNow is a cloud-based solution provider that can help its customers automate IT business management. The company’s core business revolves around simplifying and automating workflows to manage “incidents, problems, and changes” in IT operational events. In addition, it generates approximately 95% of revenue from subscription fees. Due to the economic slowdown, companies are more focused on protecting income, ensuring viability and increasing productivity. This may benefit ServiceNow, because its enterprise workflow products may receive further attention. On the other hand, the crisis has affected its business partners and suppliers, hindering the company’s ability to provide services. Although its subscription-based business model makes revenue predictable, the risks faced by customers who suffer huge losses due to lock-in may cause some problems for their top line. In addition, it may encounter difficulties in completing new transactions and renewing contracts, which will have a negative impact on its future revenue. We believe that ServiceNow’s third-quarter results in September may see its growth rate decline.

However, in the coming weeks, we expect demand to continue to improve, In the United States, the number of new Covid-19 cases has decreased Boost market expectations. After the Fed’s stimulus measures have helped people to let go of their fears, the market has been willing to “examine” the current period of weakness and take a longer-term perspective. Now investors are mainly focusing on the performance in 2021. Although market sentiment may be fickle, and evidence of the continued rise in new cases may once again shock investors.

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