Here's Why ServiceNow, Inc. Shares Plunged Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of ServiceNow, Inc. (NYSE: NOW  ) sank more than 15% early Thursday, then settled down around 6% despite solid first-quarter results from the IT infrastructure specialist.

So what: Quarterly revenue rose 62% year-over-year to $139.1 million, which translated to an adjusted net loss of $0.08 per share. Analysts, on average, expected the same $0.08-per-share loss but on lower sales of $134.64 million.

Better yet, ServiceNow projects second-quarter revenue between $160 million and $162 million, compared to analysts' expectations for Q2 sales of just $156.69 million. For the full year, ServiceNow sees 2014 revenue in the range of $652 million to $657 million, or year-over-year growth between 54% and 55%. Once again, that's well above analysts' estimates calling for 2014 sales of $644.24 million.

Now what: ServiceNow CEO Frank Slootman added, "We are off to a great start in 2014. We exceeded our previously stated financial outlook on revenue, added 134 net new customers and had nine new deals with an annual contract value in excess of $1 million, a record for ServiceNow."

Frankly, today's drop makes little sense considering ServiceNow did everything expected of it and more. The stock obviously doesn't look "cheap" trading around 18 times last year's sales and above 200 times next year's expected earnings, but that's not entirely uncommon for businesses focusing on massive top-line growth to achieve sustained profitability down the road. In the end, assuming ServiceNow's revenue continues increasing as expected, I think today's pullback could serve as a great buying opportunity for patient, long-term investors.

Not plunging: Six stock picks poised for incredible growth
If ServiceNow doesn't quite whet your appetite for growth, there are plenty of other great opportunities out there. To be sure, Motley Fool co-founder David Gardner has proved skeptics wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2928779, ~/Articles/ArticleHandler.aspx, 9/3/2015 12:52:21 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Steve Symington

Technology and consumer goods specialist for the Fool. Steve looks for responsible businesses which positively shape our lives. Then, he invests accordingly. Enjoy his work? Connect with him on Twitter & Facebook so you don't miss a thing.

Today's Market

updated 3 hours ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:03 PM
NOW $69.95 Up +1.03 +1.49%
Service Now CAPS Rating: **