Is it Too Late to Buy ServiceNow Stock? | NOW Stock Analysis
Summary
Parkev analyzes ServiceNow's performance, highlighting its management's ability to reduce investor concerns regarding AI-driven business disruption. The company is guiding for 21% revenue growth and non-GAAP operating margins near 32% for the year 2026, showcasing a business that continues to scale efficiently. Parkev notes that ServiceNow has grown from less than $2 billion in revenue in 2017 to $14.7 billion currently, while also improving its return on invested capital to 11%.
Regarding valuation, Parkev mentions that ServiceNow's stock experienced a significant dip to $80 earlier in the year during a software market sell-off, where it traded at a forward P/E of less than 20. Although the stock has since recovered to around $144, Parkev calculates an intrinsic value of $155 per share using a discounted cash flow model. While the stock is currently rated as a buy, Parkev emphasizes that the conviction is lower compared to previous months because the current price is much closer to the estimated fair value.
Mentioned Stocks
Reasoning: Parkev rates ServiceNow as a buy because it is growing revenue at over 20% annually and has significantly improved its operating margins and return on invested capital. He mentions that the company is trading at a forward P/E of 29, which is attractive compared to its historical range of 40-60. Parkev calculates the intrinsic value of the stock at $155 per share, and while he considers the current price of $145 to be fairly valued, he maintains a buy rating with lowered conviction due to the recent price surge from $80.