Service Now BUY

NOW : NYSE : US$58.07
BUY 
Target: US$72.00 

COMPANY DESCRIPTION:
ServiceNow is a leading provider of cloud-based services
that automate enterprise IT operations — this includes a
suite of applications built on the firm’s proprietary
platform that automates workflow and provides
integration between related business processes.
ServiceNow was founded in 2004, is headquartered in
San Diego, CA and has been public since June 2012.

Technology — Enterprise Software — Infrastructure
PREMIUM EXECUTION FROM A PREMIUM COMPANY; REITERATE BUY
Investment thesis
Whether we get a Q4 software rally or not, we continue to believe that the first place
investors will look is going to be open-ended, leading growth firms in relatively
uncrowded segments. This describes ServiceNow. While more than 9x revenues on
2015E is at the high end of where we like to recommend the most premium growth
names, we believe NOW warrants the premium. Indeed, even with a likely
degradation of the multiple, we believe this stock should easily generate more than
20% upside over the coming 12 months. Reiterate BUY.

No surprises here, another upside quarter. NOW reported strong Q3/14 results
with revenue of $178.7M (+61% y-o-y) and operating income of $10.2M, which
were respectively $3.7M and $8.0M ahead of our estimates
Calculated billings of $200.7M (+ 58% y-o-y) were $2.3M better than our Street-high
forecast and well ahead of management’s $190-193M guidance.
 Customer metrics. Average revenue per user was $275K, up 21%

Outlook: momentum continues,

 

inching forecasts higher again. NOW’s Q4/14
guidance set expected revenues roughly $1.5M ahead of our previous estimate
(despite a $4M FX headwind) and calculated billings ~$10M ahead. Our revised
Q4/14 revenue and billings estimates imply respective y-o-y growth of 55% and
50%. We have similarly increased our C2015 revenue and FCF estimates by
$7M and $25M to $940M (+39%) and $127M, or $0.74 per share

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