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 IT infrastructure specialist ServiceNow, (NOW 1.98%) jumped 14% Thursday, after at least four analysts chimed in with positive notes on the stock following its latest quarterly earnings announcement.
So what: Fourth-quarter revenue rose 67% year-over-year to $125.2 million, which translated to an adjusted net loss of $3 million, or $0.02 per share. Analysts, on average, were expecting the company to report a quarterly net loss of just $0.01 per share, but on lower revenue of $120.25 million.
In the current quarter, ServiceNow expects revenue in the range of $133 million and $135 million, also well above expectations for $131 million. Better yet, ServiceNow projects full-year 2014 sales of $640 million to $645 million, compared to estimates for just $611 million.
The performance was good enough to spur positive notes from analysts at Raymond James, Canaccord Genuity, Robert W. Baird, and Susquehanna -- all of whom recommend buying the stock with price targets ranging from $70 to $75 per share.
Now what: To be sure, ServiceNow not only boasted a 96% subscription renewal rate in the most recent quarter -- indicating existing customers are more than happy with its value proposition -- but also continued to build the average value of those contracts with upsells representing a full 36% of their total annual contract value. What's more, ServiceNow tacked on another 549 customers in 2013, bringing its cumulative count to over 2,060, and achieved record billings of $166 million in the most recent quarter.
The stock may look pricey trading around 175 time next year's estimated earnings, but that's not entirely uncommon for companies quickly growing their top-lines en route to sustained long-term profitability. If ServiceNow can continue delivering on its growth promises, I think the stock could still prove a bargain for patient investors down the road.
