NOW - ServiceNow: Likely No Upside Left

2024-03-11 20:11:59 ET

Summary

• ServiceNow is trading at a very rich ~14x forward revenue and ~57x forward P/E multiple.
• ServiceNow has seen significant growth and profitability, but its strengths are already reflected in its high valuation.
• Generative AI has been a tailwind for ServiceNow, but this is already embedded into current results and is unlikely to drive a major second growth spurt.

Amid a very expensive S&P 500 and benign market sentiment toward growth stocks, one style of tech investment has become very popular again: high price for high quality. And while these plays perform really well in an up market, my macro view is that we're more likely than not to see downside in the major indices through the rest of the year as we contend with a number of uncertainties: the pace of the Fed's rate cuts that is so critical to the market's enthusiasm today, a volatile U.S. election cycle, and an uncertain macroeconomic recovery....

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