Analyst Note| Dan Romanoff, CPA |
We are raising our fair value estimate to $685 per share, from $630 previously, based on continued beat and raise performance from wide-moat ServiceNow. We see some upside to shares, especially given a modest pullback in afterhours trading. We continue to favor the name for its long-term organic-driven growth as it continues to leverage its strength in workflow automation to penetrate existing customers more deeply in IT and more broadly with human resources and customer service-specific products. ServiceNow delivered strong results, including upside to revenue, remaining performance obligation, or RPO growth, and adjusted operating margin. We think fourth-quarter guidance is solid, although foreign exchange rates optically limit upside. In our view, the quarterly results reinforce our view that ServiceNow is benefitting from digital transformation efforts which are being pulled forward, as corporate IT infrastructures have often been exposed as insufficient in the current remote work environment.