ServiceNow is the IBD Stock Of The Day as the enterprise software maker trades just below an entry point in the wake of popping on its second-quarter earnings report. ServiceNow stock has gained 14% in 2024, outperforming other big-cap software companies.
On the stock market today, ServiceNow stock shed 3.5% to close at 799.06.
Santa Clara, Calif.-based ServiceNow brought in Bill McDermott as its chief executive in late 2019. He was formerly CEO of Germany's SAP. ServiceNow stock has surged over 180% since McDermott took over as CEO, though shares hit a rough patch in 2022.
The iShares Expanded Tech-Software Sector ETF, an industry index that includes Microsoft and many big-cap software companies, has gained only 4.6% this year. Shares in big-cap Salesforce are down 1%. Workday has shed 15%.
ServiceNow Stock: Q2 Earnings Beat
ServiceNow's software tracks and manages services provided by information-technology departments. Also, its self-service tech portal enables company employees to access administrative and workflow tools.
ServiceNow has expanded from its core business into software for human resources, customer service management and security.
From a technical view, ServiceNow stock has forged a consolidation with a 806.52 handle buy point.
ServiceNow's Q2 earnings, revenue and current remaining performance obligations, or CRPO, came in above expectations. CRPO bookings are an aggregate of deferred revenue and order backlog and serve as a sales growth metric.
"Against a backdrop of a wall of investor worry about the state of overall software spending, ServiceNow posted a very solid print," UBS analyst Karl Kierstead said in a report.
COO Resigns
Also, ServiceNow said its president and chief operating officer, Chirantan "CJ" Desai, has resigned.
Meanwhile, ServiceNow is one of many AI stocks to watch. Since 2020, McDermott has been acquiring AI startups to build up ServiceNow's platform. However, McDermott hasn't make big software acquisitions as he did at SAP.
Generative AI technologies create text, images, video and computer programming code on their own. Industry-specific versions of generative AI are expected to use company data to train AI models.
For most big application software companies, how to charge for AI-related products has been an issue. ServiceNow bundles AI conversational tools with premium products.
"Gen AI momentum is real and continues to build," Morgan Stanley analyst Keith Weiss said in a report. "Management noted that net-new annual contract value for the Pro Plus edition doubled quarter-over-quarter with Pro Plus delivering 11 deals over $1 million including 2 deals over $5 million."
Most enterprise software makers will not monetize generative AI, or "conversational AI," in a material way until late 2025, some analysts say.
ServiceNow Stock Technical Ratings
Meanwhile, ServiceNow stock holds a Relative Strength Rating of 85 out of a best-possible 99.
ServiceNow owns an IBD Composite Rating of 94, 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. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
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.
