Given that technology stocks have been fueling the stock market's gains for the past several years, you might find it surprising that one of the most beaten-up groups of stocks lately is part of the tech sector. The artificial intelligence (AI) tide has not lifted all boats, and the software-as-a-service (SaaS) space has been battered over the past year due to rising concerns that AI systems will disrupt these businesses.
One complaint from investors is that amid this period of slumping prices, few SaaS executives have stepped up to buy shares in their own companies -- actions that would signal confidence on their part in the businesses' future.
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However, purchases of that type can be more complicated because SaaS company executives often receive a major piece of their compensation in the form of stock and options, and, as such, they use Rule 10b5-1 plans to manage their sales to harvest cash. Under the Securities and Exchange Commission's (SEC) Section 16(b) short-swing profit rule, any purchase those executives make within six months of a sale would require them to forfeit the profits from those trades to the company.
Because these executives often sell shares regularly to cover taxes on vesting stock or to free up funds for their normal expenses, they are effectively blocked from buying shares in their own companies on the open market. To buy without penalty, they would need to cancel their selling plans, then wait six months from their last sale.
While this isn't the easiest of processes, the executives of one major SaaS company are stepping up to the plate. In an SEC filing, ServiceNow (NOW 2.46%) announced that CEO William McDermott, President and CFO Gina Mastantuono, Vice Chairman Nicholas Tzitzon, Chief People and AI Enablement Officer Jacqueline Canney, and Special Counsel Russell Elmer have cancelled their stock trading plans.
In addition, McDermott said he will buy $3 million in stock on Feb. 27, which is the earliest date he can purchase the stock without facing short-swing penalties. His last sales were in August.
NYSE: NOW
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Should investors follow McDermott's lead?
While some SaaS companies' businesses may get seriously disrupted by AI, it doesn't seem likely that ServiceNow will be one of them. Its platform is an integral part of its customers' workflow between information technology, human resources, and customer service. It also provides an important system of record built on custom business logic, security protocols, and audit trails -- and one that won't be easily removed or replicated.
Meanwhile, its platform is ideal for layering AI applications on top of, and it has been doing just that with its Now Assist suite of generative AI solutions. It also designed Control Tower, an agentic AI orchestration layer that should become increasingly important as AI agent sprawl takes hold. The company has also worked to increase security and permissions around its AI agents through its acquisitions of asset visibility company Armis and rights permission solution Veza.
ServiceNow has continued to grow its revenue at a more than 20% clip, and it's now trading at a forward price-to-sales multiple of 7 and a forward price-to-earnings ratio of 26 (based on analysts' 2026 estimates). Given how entrenched its platform is and the growth it's generating, I'd be a buyer of ServiceNow stock.
