ServiceNow stock is the IBD Stock of the Day ahead of the enterprise software maker 's fourth quarter earnings report.
Q4 earnings for ServiceNow stock are due Jan. 29. Investors may want to be cautious ahead of the report. One strategy around earnings would be to use call options. That approach would let investors cap their possible loss while still letting them participate in any post-earnings upside.
ServiceNow's full year 2024 revenue is expected to easily pass $10 billion – a big milestone for software companies.
In a recent interview with IBD, Chief Executive Bill McDermott talked about ServiceNow's artificial intelligence strategy.
ServiceNow Stock Performance
On the stock market today, ServiceNow stock rose 1.4% to close at 1,071.48.
Like big-cap software peer and rival Salesforce, ServiceNow stock hit an all-time high in December. Shares in ServiceNow hit 1,157.90 on Dec. 11, then retreated late in 2024.
From a technical view, 1,157.90 would be a long-term entry point if ServiceNow forges a traditional base.
The software stock has clawed back above its 50-day moving average, which can act as an early entry.
In addition, ServiceNow stock has found support at its 21-day exponential moving average. IBD research has found that with the biggest stock market winners, they tend to find support at the 21-day line after a breakout for at least several weeks.
Having struggled to generate new revenue from conversational "copilots," software companies are now turning to autonomous, goal-driven AI "agents" that complete tasks on their own.
While some analysts are focused on software makers gaining traction in monetizing new generative artificial intelligence products, ServiceNow also has other growth drivers.
Expanding Into New Markets
McDermott has taken ServiceNow from its roots in information technology services management into new departments such as human resources, finance, legal and procurement.
Known mainly as a "back-office" software maker, ServiceNow recently has pushed into "front office" software (customer service management, field service management and supply chain management).
"As newer products grow, we estimate non-IT workflows will make a greater proportion of the annual contract value mix," said Jefferies analyst Samad Samana in a report.
Raymond James analyst Adam Tindle holds a similar view.
"We expect ServiceNow to remain a leader in its core IT operations use cases as it wisely moves to adjacent areas and creates vertical-specific solutions," Tindle said in an initiation report in December.
He added: "ServiceNow's advantages to drive (artificial intelligence product) adoption lies in being an incumbent with a critical foothold in daily operations and being able to invest heavily in innovation with its balance sheet."
Santa Clara, Calif.-based ServiceNow brought in McDermott as its chief executive in late 2019. He was formerly CEO of Germany's SAP.
Federal Spending Outlook
ServiceNow's Q3 earnings and revenue topped Wall Street targets. Heading into 2025, one concern has been a softening outlook for current remaining performance obligations. CRPO bookings are an aggregate of deferred revenue and order backlog and serve as a sales growth metric.
In addition, two other concerns for ServiceNow stock are Europe, where some economies have slowed, and U.S. federal government sales. President-elect Donald Trump has unveiled a new government-cost cutting initiative.
In November, ServiceNow brought in Amit Zavery as president and chief operating officer. He had been general manager of Alphabet's cloud computing business.
In 2025, analysts polled by FactSet model over 20% growth. When ServiceNow reports earnings on Jan. 29, UBS analyst Karl Keirstead in a report said that guidance for 21% sales growth in 2025 will be enough for investors.
Meanwhile, ServiceNow has forecast $15 billion in subscription revenue for 2026.
ServiceNow Stock Technical Ratings
Meanwhile, ServiceNow stock holds a Relative Strength Rating of 90 out of a best-possible 99.
ServiceNow owns an IBD Composite Rating of 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
In addition, ServiceNow stock has an Accumulation/Distribution Rating of C-plus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are selling than buying.
The rating, on a scale of A+ to E, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
