Analyst Note| Dan Romanoff, CPA |
Wide-moat ServiceNow covered a range of topics at its virtual investor day on May 10, including a look into some product areas, the innovation pipeline, thoughts on the company’s competitive position, market size--all in the context of financial metrics. ServiceNow also announced the acquisition of Lightstep, a provider of application monitoring and observability. While no terms were disclosed, we view the deal as a bolt-on technology driven acquisition. Management maintained repeatedly that ServiceNow is an organically driven company. Overall we believe the event served as an exclamation point on our thesis, which centers on the company’s land-and-expand strategy of upselling into customer service and HR, industry vertical solutions, and higher priced Pro and Enterprise versions--all while generating a strong margin profile. We maintain our $587 per share fair value estimate and see the stock among our top picks in software with its valuation increasingly attractive.