1. ServiceNow Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 97
ServiceNow Inc. (NYSE:NOW) is a cloud-based software company that offers a platform for digital workflows. Its role as an AI platform for business transformation is expanding rapidly, with NowAssist becoming the fastest-growing product in the company’s history, doubling its net new annual contract value quarter-over-quarter. In Q2, ServiceNow closed 11 deals, each worth over $1 million.
Bernstein recently reaffirmed its Outperform rating on ServiceNow Inc. (NYSE:NOW), setting a price target of $906. The firm sees the software company as a strong “quality compounder,” particularly for long-term investors. Bernstein suggested that any significant price pullback could provide a strategic opportunity to increase positions in the company, as seen during previous market downturns that created attractive buying opportunities.
ServiceNow Inc. (NYSE:NOW) continues to excel in customer service management, generating over $1 billion in revenue, and maintains a strong presence in the financial services sector, serving all of the top 24 global banks. Future growth is anticipated to be driven by increasing enterprise investment in AI, a market projected to reach $3 trillion by 2027.
At the end of Q2 2024, 91 of the 912 hedge funds tracked by Insider Monkey held stakes in ServiceNow Inc. (NYSE:NOW), positioning it as one of the top breakout stocks to consider.
Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its April 2024 investor letter:
“US-based software company, ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
While we recognize the potential of NOW as an investment, we believe certain deeply undervalued AI stocks offer greater prospects for higher returns in a shorter period. If you’re seeking an AI stock with even more promise than those on our list and trading at less than 5 times its earnings, check out our report about the cheapest AI stock.
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