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Why ServiceNow Shares Jumped

By Evan Niu, CFA - Apr 25, 2013 at 4:03PM

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Is this meaningful or just another movement?

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 (NOW 1.47%) have jumped today by as much as 17% after the company posted better-than-expected earnings.

So what: Revenue in the first quarter came in at $85.9 million, a year-over-year gain of 81%, and higher than the $8.21 million consensus estimate. That resulted in a non-GAAP net loss of $0.01 per share, narrower than the $0.03 per share loss that investors were braced for. Those figures also beat ServiceNow's own previously provided guidance, thanks, in part, to healthy upsell activity.

Now what: ServiceNow achieved a customer renewal rate of 96%, and the quarter represented the company's first time to reach over $100 million in billings. Guidance for the second quarter calls for revenue in the range of $94 million to $96 million, ahead of the $91.8 million forecast. Mizuho Securities has followed up the results by upgrading shares from "neutral" to "buy," and raising its price target from $35 to $45.

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