Shares of ServiceNow (NYSE: NOW) gained over 8% on April 28, after the company delivered upbeat first-quarter results exceeding the high end of its guidance.
Investors cheered the raised mid-point of 2022 subscription revenue guidance as well as an accelerated growth outlook.
Based in Santa Clara, California, ServiceNow is a software company that develops a cloud computing platform to help companies manage digital workflows for enterprise operations.
Adjusted earnings of $1.73 per share beat analysts’ expectations of $1.70 per share. The company reported earnings of $1.52 per share for the prior-year period.
Furthermore, revenues jumped 27% year-over-year to $1.72 billion and exceeded consensus estimates of $1.7 billion. The increase in revenues reflects a surge in Subscription revenues, which increased 26% to $1.63 billion.
Based on robust Q1 results, management updated financial guidance for FY2022.
The company raised the mid-point of its Q2FY22 Subscription revenues guidance from $1.67 billion to $1.675 billion. Furthermore, it expects growth to accelerate 29% year-over-year on a constant currency basis.
For the full year, subscription revenues are projected to grow 28.5% year-over-year to be in the range of $7.025 billion to $7.040 billion.
ServiceNow CEO, Bill McDermott, said, “We are in a sustained demand environment. Companies are investing with a sense of urgency in technologies that get them to the right outcomes, fast. It’s very clear that businesses can no longer revert to the ‘status quo.’ We’re now in a tech-to-compete world.”
Wall Street’s Take
Following robust Q1 results, RBC Capital analyst Matthew Hedberg increased the price target on ServiceNow to $670 (32.93% upside potential) from $660 and reiterated a Buy rating.
Turning to Wall Street, the analyst consensus is also optimistic about ServiceNow, with a Strong Buy rating based on 17 Buys, one Hold and one Sell. The average ServiceNow price target of $649.84 indicates an upside potential of 28.93%.
Bloggers Weigh In
TipRanks data shows that financial blogger opinions are 82% Bullish on NOW stock, compared to a sector average of 68%.
Despite several macro headwinds, ServiceNow delivered superior performance, surpassing the high end of guidance across all Q1 2022 metrics.
The robust revenue growth outlook showcases the resilience of the business as well as customer demand, which bodes well for the stock in the long-term.
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