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ServiceNow Posts a Strong Quarter, Lifts Outlook
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ServiceNow Posts a Strong Quarter, Lifts Outlook

Shares of California-based software firm ServiceNow (NOW) gained 0.7% in extended trading hours on Wednesday after the company reported robust financial results for the second quarter of 2021.

ServiceNow’s enterprise cloud computing solutions are used by organizations in the financial services, information technology, consumer products, government, telecommunications, oil and gas, education and healthcare sectors.

The company reported adjusted earnings per share (EPS) of $1.42, above the Street’s estimate of $1.21 and the prior-year figure of $1.23. Total revenues grew 32% year-over-year to $1.41 billion, exceeding analysts’ expectations of $1.36 billion.

Subscription revenues increased 31% year-over-year to $1.33 billion and Professional services and other revenues rose 41% to $79 million. Total number of customers jumped 25% to 1,201 with an annual contract value of more than $1 million. (See ServiceNow stock chart on TipRanks)

The President and CEO of ServiceNow, Bill McDermott, said, “I’m so proud of our team’s performance, significantly exceeding the high-end of our guidance across all metrics, which is reflected in our strong full-year guidance raise.”

For the third quarter, the company expects Subscription revenues to range from $1.4 billion to $1.45 billion. Furthermore, ServiceNow expects Subscription revenues to lie in the range of $5.53 billion to $5.54 billion for full-year 2021.

After the announcement of the second-quarter results, Goldman Sachs analyst Kash Rangan maintained a Buy rating on the stock and raised the price target to $725 from $695 (24.3% upside potential). In a research note to investors, the analyst said, “The quarter validates the belief that ServiceNow’s second half of 2021 and 2022 will show acceleration.”

Overall, the stock has a Strong Buy consensus based on 13 Buys and 2 Holds. The average ServiceNow price target of $638.08 implies a 9.4% upside potential. Shares of the company have gained nearly 31% over the past year.

According to TipRanks’ Smart Score rating system, ServiceNow scores a “Perfect 10,” suggesting that the stock is likely to outperform market averages.

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