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Why ServiceNow Stock Gained 10.4% Last Month

By Keith Noonan – Jun 5, 2020 at 9:36AM

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The enterprise software company is crushing the market in 2020, and its stock is up roughly 250% over the last three years.

What happened

Shares of ServiceNow (NOW -2.05%) gained 10.4% in May, according to data from S&P Global Market Intelligence. The enterprise software stock rallied amid gains for the broader market, and the company's share price is now up roughly 33.5% year to date. 

^SPX Chart

^SPX data by YCharts.

ServiceNow's stock gains last month tracked closely in line with momentum for the market. Shares also appear to have gotten a boost after the company announced new applications designed to help businesses safely bring employees back to work amid challenges created by the coronavirus pandemic.

A person using a laptop.

Image source: Getty Images.

So what

ServiceNow published a press release on May 18, announcing the release of ServiceNow Safe Workplace. The software suite includes four apps: Employee Readiness Surveys, Employee Health Screening, Workplace Safety Management, and Workplace PPE Management. The company also launched a specialized dashboard for managing and visualizing data gathered across the new software suite, and it also debuted updates for its Emergency Self Report and Emergency Outreach apps. 

Now what

Trends suggest that more economic activity will increasingly be transitioning to the digital sphere, and this momentum is creating a favorable backdrop for the company's workflow-management software services. ServiceNow is guiding for adjusted subscription revenue between $1.008 billion and $1.013 billion in the second quarter (increasing of 29.5% year over year at the midpoint of the target), and an operating margin of 23%.

For the full-year period, management expects adjusted subscription revenue between $4.167 billion and $4.187 billion, representing 28.5% year-over-year growth at the midpoint. The company anticipates a gross-profit margin of 86% for the year, an operating margin of 23%, and a free-cash-flow margin of 29%. 

Shares trade at roughly 89 times the average analyst target for this year's earnings and 16.5 times the average target for expected sales.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends ServiceNow, Inc. The Motley Fool has a disclosure policy.

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