ServiceNow is Thursday's pick for IBD 50 Growth Stocks To Watch, as shares trade in a buy zone after a breakout. NOW stock rose to a new high on Thursday but reversed lower in late trading.
The company designs workflow software that digitizes, automates and optimizes business processes. Its Now Assist technology implements artificial intelligence used in work automation, content creation and conversation exchange.
On Oct. 25, ServiceNow announced it expanded its partnership with consulting company Deloitte, to incorporate its Now Assist generative AI capabilities into the firm's managed services. It also partnered with Nvidia on its enterprise generative AI features.
ServiceNow is ranked first out of 127 stocks in IBD's enterprise software industry group. NOW stock is in the IBD Big Cap 20 and earned its way onto IBD Leaderboard. An impressive 85% of Fortune 500 companies partner with the digital workflow company.
NOW Stock In Buy Zone
NOW stock broke out of a flat base and tapped the 614.36 buy point in heavy volume on Tuesday, but closed below the entry. The stock rose 1.9% on Wednesday in heavy trading, lifting it to a 5% buy zone that reaches to 645.08.
The rally started after the company's robust third-quarter earnings report Oct. 25. NOW stock reclaimed its 50-day moving average on Oct. 30. Shares had a 10-day winning streak though Wednesday. NOW stock has gained around 61% this year and hit a 52-week high Thursday, before retreating.
Recent heavy volume shows institutions are gobbling up shares. Its IBD Accumulation/Distribution Rating of A- indicates heavy institutional buying over the last 13 weeks. Its strong 2.1 IBD Up/Down Volume Ratio supports the strong demand. All of these factors are a positive sign for the AI stock.
Its relative strength line hit a 52-week high, as shown by the blue dot on the MarketSmith weekly chart.
ServiceNow Earnings Keep Growing
ServiceNow operates a subscription-based business model. It reported better-than-expected third quarter adjusted earnings and sales. The enterprise software company also gave subscription revenue guidance above views.
Its quarterly earnings and sales growth accelerated in the last several quarters. The CAN SLIM investing strategy looks for earnings growth of at least 25% in the latest quarter or two.
Its Q3 earnings grew 49%, up from 37% and 46% in the prior two quarters. Quarterly sales have consistently grown in the 20% range for the last eight quarters.
The company highlighted its AI potential in the earnings report.
"With the capabilities unlocked by generative AI, the window of opportunity is even more expansive, positioning us well to continue delivering a strong balance of growth and profitability," said CFO Gina Mastantuono in the earnings release.
ServiceNow holds best-possible 99 IBD Composite and EPS Ratings.
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