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Globe and Mail
2 days ago
- Business
- Globe and Mail
ServiceNow Trades 16% Below 52-Week High: Buy, Sell or Hold the Stock?
ServiceNow NOW shares closed at $1,011.89 on Tuesday (July 2), roughly 15.5% below the 52-week high of $1,198.09 it hit on Jan. 28, 2025. NOW shares have dropped 4.5% year to date (YTD), underperforming the Zacks Computer and Technology sector's return of 5.7% but outperforming the Zacks Computers – IT Services industry's drop of 6.3%. NOW shares have suffered from a worsening macroeconomic environment following U.S. President Donald Trump's decision to levy tariffs on trading partners, including China and Mexico. The company's federal business is expected to suffer from DOGE-related issues. ServiceNow expects unfavorable forex impacts of $175 million for 2025 and back-end loaded federal business is expected to hurt the growth rate. ServiceNow's strategy to accelerate the adoption of its Agentic AI by foregoing immediate revenues is expected to affect the subscription revenue growth rate in 2025. NOW Stock's Performance However, since reporting first-quarter 2025 results on April 23, ServiceNow shares have jumped 24.5%. NOW has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. The company's expanding portfolio, accretive acquisitions and a rich partner base are the key catalysts. Technically, ServiceNow's stock is displaying a bullish trend as it is trading above both 200-day and 50-day moving averages. NOW Trades Above 50-day & 200-day SMAs So, what should investors do with the NOW stock? Let us dig deeper to find out. Strong Portfolio & Acquisitions Aid NOW's Prospects NOW's expanding portfolio has been a major driver. In May 2025, ServiceNow introduced its Core Business Suite, an AI-powered solution designed to streamline and transform core business operations, including HR, finance, procurement, facilities and legal, by unifying workflows and automating processes across departments to improve efficiency, reduce time to value and enhance employee experiences. ServiceNow announced the launch of AI agents in its Security and Risk solutions, transforming enterprise security by enabling self-defending systems, improving response times, and enhancing risk management in collaboration with Microsoft MSFT and Cisco. Expanding its portfolio in May 2025, NOW announced advancements in autonomous IT, introducing agentic AI capabilities on the ServiceNow AI Platform to drive zero outages, zero downtime and zero service desk incidents. ServiceNow's enterprise workflow automation suite has been gaining traction as enterprises increasingly adopt digital tools to streamline operations across departments. Through the Now platform, ServiceNow supports diverse workflows, ranging from IT service management and customer service to HR, employee experience and app development. Acquisitions have also played an important role in expanding NOW's portfolio. In April 2025, ServiceNow announced the acquisition of a company specializing in AI-powered and Configure, Price, Quote solutions. This move is set to bolster ServiceNow's CRM offerings, particularly in sales and order management, by integrating advanced AI capabilities. ServiceNow's expanding platform is driving enterprise adoption. In the first quarter of 2025, the company reached 508 customers, generating more than $5 million in ACV, representing 20% year-over-year growth. Expanding customer base is driving subscription revenues, which hit $3.01 billion in the first quarter of 2025, reflecting year-over-year growth of 20% in constant currency. NOW Benefits From Expanding Partner Base A rich partner base that includes the likes of Alphabet, Amazon AMZN, Microsoft and NVIDIA NVDA is noteworthy. In May 2025, NOW partnered with Amazon's cloud computing arm, Amazon Web Services, to launch a bi-directional data integration solution, enabling enterprises to unify data and trigger AI-powered workflows by connecting ServiceNow with Amazon Redshift. NVIDIA and NOW collaborated to launch AI agents for the telecom industry. The AI agents were built with NVIDIA AI Enterprise software and the AI platform NVIDIA DGX Cloud. ServiceNow has expanded its partnership with NVIDIA to enhance agentic AI by integrating NVIDIA Llama Nemotron reasoning models and AI agent evaluation tools into the ServiceNow Platform for optimized business transformation. NOW's Earnings Estimate Revision Shows Upward Trend The Zacks Consensus Estimate for 2025 earnings is pegged at $16.54 per share, up by a penny over the past 30 days, indicating an 18.82% increase from the 2024 reported figure. The consensus mark for second-quarter 2025 earnings is pegged at $3.54 per share, up by a penny over the past 30 days, suggesting year-over-year growth of 13.1%. ServiceNow Stock Seems Overvalued NOW stock is overvalued, as suggested by the Value Score of F. In terms of the forward 12-month Price/Sales, NOW is trading at 14.75X, higher than the broader sector's 6.51X. Price/Sales Ratio (F12M) Conclusion ServiceNow's expanding portfolio and strong partner base are expected to drive its clientele, boosting subscription revenues. However, unfavorable forex amid a challenging macroeconomic environment is concerning. NOW's stretched valuation makes the stock unattractive for value investors. ServiceNow currently has a Zacks Rank #3 (Hold), which implies that investors should stay away from the stock for the time being. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Zacks' Research Chief Names "Stock Most Likely to Double" Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest. This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%. Free: See Our Top Stock And 4 Runners Up Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Inc. (AMZN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report ServiceNow, Inc. (NOW): Free Stock Analysis Report
Yahoo
6 days ago
- Business
- Yahoo
5 Insightful Analyst Questions From Choice Hotels's Q1 Earnings Call
Choice Hotels' first quarter results were met with a negative market reaction, as revenue and non-GAAP profit both came in below Wall Street estimates. Management pointed to ongoing strength in business travel and robust performance in its extended stay and economy segments as key drivers, with CEO Pat Pacious noting a shift toward higher-income, resilient customers. Despite these operational positives, management acknowledged increased macroeconomic uncertainty and a softening in leisure demand. The company's ability to outperform peers in certain segments was offset by less favorable trends in others, leading to cautious commentary on the near-term outlook. Is now the time to buy CHH? Find out in our full research report (it's free). Revenue: $332.9 million vs analyst estimates of $346.7 million (flat year on year, 4% miss) Adjusted EPS: $1.34 vs analyst expectations of $1.37 (2% miss) Adjusted EBITDA: $129.6 million vs analyst estimates of $131.3 million (38.9% margin, 1.3% miss) Management lowered its full-year Adjusted EPS guidance to $7.06 at the midpoint, a 0.7% decrease EBITDA guidance for the full year is $625 million at the midpoint, in line with analyst expectations Operating Margin: 24%, up from 18.1% in the same quarter last year RevPAR: $40.46 at quarter end, up 1.1% year on year Market Capitalization: $5.85 billion While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Shaun Kelley (Bank of America) asked about consumer profile shifts and whether 'trade down' trends are driving demand. CEO Pat Pacious responded that higher-income and business travelers now make up a larger share, with market share gains more than offsetting any leisure softness. Shaun Kelley (Bank of America) also inquired about net unit growth. CFO Scott Oaksmith said conversion velocity is accelerating, especially in the international segment, and management remains confident in achieving 1% system growth for the year. Michael Bellisario (Baird) questioned the sustainability of ancillary fee growth. Oaksmith explained that partnership and platform services are expected to grow at a faster rate than core royalties and provide a stable EBITDA contribution. Patrick Scholes (Truist Securities) probed the outperformance in economy and midscale segments and whether location or other factors contributed. Pacious attributed results to drive-to locations, lower gas prices, and a strong value proposition for retirees and cost-conscious travelers. Robin Farley (UBS) asked about pipeline declines and conversion dynamics. Pacious and Oaksmith clarified that the mix of new construction versus conversions skews reported pipeline data, with conversion hotels moving through the pipeline much faster than new builds. In coming quarters, the StockStory team will be closely monitoring (1) the pace at which extended stay and upscale hotel growth translates into higher systemwide revenue, (2) the company's success in accelerating hotel conversions and international expansion, and (3) the trajectory of ancillary revenue streams, especially partnership services and loyalty program monetization. Trends in business travel and consumer trade-down behavior will also be critical signposts. Choice Hotels currently trades at $127.02, in line with $125.83 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it's free). Market indices reached historic highs following Donald Trump's presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has caused many investors to adopt a "fearful" wait-and-see approach, we're leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
