ServiceNow is the IBD Stock Of The Day as the enterprise software maker trades in a buy zone. ServiceNow stock popped on its second-quarter earnings report on July 25, then pulled back as investors took profits.
The software stock found support at its 50-day moving average, a key technical level, and clawed back into a buy zone.
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.
ServiceNow's relative strength line has remained strong as the Magnificent Seven struggle amid a market rotation out of the technology sector and artificial intelligence plays.
The stock has forged an early entry point of 806.52 using its July 5 intraday high and a 815.32 buy point — the top of a consolidation.
Meanwhile, ServiceNow stock has gained 17% in 2024, outperforming other big-cap software companies. Some analysts view ServiceNow as one of a few software makers, including Microsoft, that are gaining traction in monetizing new generative artificial intelligence products.
On the stock market today, ServiceNow stock gained 1.5% to close at 818.80.
The iShares Expanded Tech-Software Sector ETF, an industry index that includes Microsoft and many big-cap software companies, has gained only 2.5% this year. Shares in big-cap Salesforce are down 3%. Workday has shed 22%.
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.
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'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.
ServiceNow COO Resigns
Also, ServiceNow said its president and chief operating officer, Chirantan "CJ" Desai, 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.
Most enterprise software makers will not monetize generative AI, or "conversational AI," in a material way until late 2025, most analysts say.
ServiceNow Stock Technical Ratings
Meanwhile, ServiceNow stock holds a Relative Strength Rating of 87 out of a best-possible 99.
ServiceNow owns an IBD Composite Rating of 95, 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 D-minus. 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.
