NOW - ServiceNow Q1 Earnings Preview: Solid Fundamentals But Stock Is Likely Capped

2024-04-22 07:00:00 ET

Summary

• ServiceNow reported strong Q4 FY23 earnings and is expected to grow its Subscription revenue by 24% YoY, with an Adjusted Operating Margin of 29% in Q1 FY24.
• The company needs to showcase its momentum with new logo acquisition and growing ACV among existing customers, as it builds out its AI-driven product roadmap in the earnings call.
• However, I believe that the management's forward guidance is already priced into NOW stock, leaving little room for upside from current levels, making it a “hold”.

Introduction & Investment Thesis

ServiceNow ( NOW ) provides an end-to-end workflow automation platform for enterprises. The stock has performed more or less at par with the S&P 500 and Nasdaq 100 YTD. The company reported its Q4 FY23 earnings in January, where it beat on both revenue and earnings expectations, growing 26% YoY and 33.8% YoY, respectively. It is expected to report its Q1 FY24 earnings on April 24, where it expects to grow its Subscription revenue by 23.5-24% to $2.5B while improving its non-GAAP operating margin by 300 basis points YoY to 29%....

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