ServiceNow Soars as Investors Regain Faith in High-Growth Stocks
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Key Takeaways
⇨ ServiceNow's stock has surged by 45% this year, outperforming the S&P 500
⇨ The company's expertise in automating and streamlining workflows in the cloud computing realm has positioned it as an industry leader
⇨ ServiceNow has demonstrated its ability to attract and retain valuable clients with high-value contracts
ServiceNow has emerged as a frontrunner in assisting businesses with automating workflows. In the wake of 2022’s surge in interest rates, investors responded by shedding shares of high-growth stocks, including ServiceNow (NOW 0.47%), and focusing on sectors like utilities and healthcare. This shift was mainly driven by the fact that high-growth stocks tend to be more sensitive to fluctuations in interest rates. With borrowing costs rising, companies found it costlier to invest in their operations, resulting in reduced earnings growth that affected the stock prices of such high-growth enterprises.
As investors began anticipating the conclusion of the Federal Reserve’s campaign of interest rate hikes in 2023, optimism resurfaced for high-growth software stocks. Investors reassessed the value of companies like ServiceNow, leading to a surge in stock prices. Year to date, ServiceNow’s stock has soared by 45%, outpacing the 16% increase in the S&P 500.
While concerns persist among some regarding a potential global economic downturn that could result in reduced IT spending, growth investors are still excited by the company’s stock and the space. According to Grand View Research, the workflow automation market is projected to experience a compound annual growth rate of 33%, growing from $11.59 billion at the end of 2023 to an impressive $86.63 billion by 2030.
ServiceNow is force in the development of cloud-based software designed to streamline workflows. These workflows encompass a series of tasks necessary to achieve objectives that range from customer service to IT support and human resources. This includes hardware like computers, laptops, tablets, smartphones, sensors, cameras, and microphones, to the utilization of the internet, cloud computing, artificial intelligence, machine learning, robotics, and blockchain.
The manual management of workflows will become increasingly complex and time-consuming. One example is the onboarding new employees, which usually involves Human Resources, IT, and Finance. By automating email correspondence, document creation, and employee task assignments, workflow automation software empowers businesses to achieve greater efficiency.
Over the past five years, ServiceNow has exhibited consistent revenue growth, outperforming many of its counterparts. According to CSImarket, ServiceNow achieved a five-year average revenue growth rate of 30%, surpassing the software and programming industry’s average annual growth rate of approximately 19%, as well as the S&P 500’s revenue growth rate of 11%.
