What happened
Shares of Service Today (NOW -0.55%) retreated last month on broad sell-offs in tech stocks, as the earnings report in the first quarter was not strong enough to curb volatile market sentiment. According to data from S&P Global Market Intelligence, the stock ended the month down 14%.
The stock is usually tracked using Nasdaq index for the month.
^IXIC YCharts data
E what now
Enterprise tech companies like ServiceNow are sensitive to the broader economy, as businesses tend to spend more in growing economies than in recessions.
Growing concerns about inflation, rising interest rates, and a potential recession have weighed on tech stocks like ServiceNow, especially as GDP fell in the first quarter, possibly signaling the start of a recession. .
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There was little news on ServiceNow in the first three weeks of the month, and the stock was tracking a slide on the Nasdaq as investors reacted to the news that interest rates could rise faster than expected, with the Federal Reserve seeking to bring inflation to the heel and cool the economy.
ServiceNow stock actually jumped 8.1% on April 28, after the company delivered a strong earnings report in the first quarter. Revenue rose 27% to $ 1.72 billion, matching estimates, and outstanding operations performance rose 29% to $ 5.69 billion, showing a strong backlog.
Profitability was also impressive, with a 25% operating margin, and fixed earnings per share jumped from $ 0.37 to $ 1.73, ahead of estimates at $ 1.70. “ServiceNow delivered another outstanding performance that exceeded expectations overall,” said CEO Bill McDermott. “We’re in a sustainable environment of demand. Companies are investing with a sense of urgency in technologies that bring them the right results, quickly.”
What now
Going forward, ServiceNow sees continued growth, requesting 26% subscription revenue growth in the second quarter and for the full year.
Like Salesforce and other large enterprise cloud tech stocks, ServiceNow has an excellent track record, returning nearly 2,000% over the past decade.
While some tech companies are seeing slow growth as COVID’s tailwinds weaken, ServiceNow is not experiencing any such problems, and continued digital innovation in the corporate world should be supported on an ongoing basis. growth of the company. With a price-to-earnings ratio close to 80, ServiceNow may be expensive, but the company has shown why it deserves a premium appreciation.