ServiceNow, Inc.’s (NOW) stock has climbed over the past five months, significantly outperforming the S&P500, rising by approximately 74.7% compared to the S&P’s gain of about 4.6%. However, hedge funds and institutions were actively selling the stock in the second quarter. It led to the shares slipping on the WhaleWisdom Heatmap, with a change in ranking to 33 from 23.
ServiceNow is an American software company that designs and produces computer software, offers cloud services and an information technology management platform. ServiceNow’s cloud computing platform helps companies manage digital workflows, which has become especially helpful during the coronavirus pandemic, as many businesses have responded to the pandemic by a shift to remote work. Also, ServiceNow has positioned its workflow applications and resources to assist businesses with their crisis response. While ServiceNow saw a brief dip in performance in March and April related to the pandemic, the equity has rebounded well in recent months.
Sellers Outnumber Buyers
During the second quarter, the total number of 13F shares held by institutions decreased by 1.5% to 173.3 million shares. The number of institutions selling the stock far outpaced the ones buying it. During the quarter, 188 institutions created new positions while 455 were adding to them, 68 liquated their holdings, and 297 reduced them. Hedge Funds showed a similar pattern of activity as aggregate 13F shared held decreased to approximately 33.3 million from 34.1 million, a decrease of approximately 2.4%. Of the hedge funds, 42 created new positions, 93 added, 26 exited, and 80 reduced their holdings.
Positive Multi-year Estimates
Analysts expect to see earnings increase over four consecutive years. Initially, ServiceNow is predicted to see year-over-year growth of 33.4% in 2020 to $4.43 per share. Growth is forecast to rise to $10.62 in 2023. Additionally, revenue is estimated to rise to approximately $8.6 billion in December 2023, up from about $4.4 billion for 2020.
Analysts Raise Price Targets
Analysts appear enthusiastic about ServiceNow’s potential and are raising price targets. Stifel Financial Corp.’s analyst, Tom Roderick, recently raised ServiceNow’s price target to $500 from $460, keeping a Buy rating on shares. Roderick notes that ServiceNow has taken a leadership role in strategic decisions surrounding workflows and broader information technology management. Wells Fargo Securities also raised ServiceNow’s price target, with analyst Phillip Winslow increasing it to $565 from $525 and maintaining an Overweight rating on shares. JMP Securities’ analyst, Patrick Walravens, raised the company’s price target to $534 from $460 with an Outperform rating, citing ServiceNow having its best quarter ever.
ServiceNow is well-positioned to benefit from workplace shifts to telecommuting and cloud services, which increased due to the pandemic and are likely to continue in the future. The impressive stock gains, coupled with the expectation for healthy growth, and analysts’ price targets, could help gain the attention of investors over time and help push prices even higher.