10 Best SaaS Stocks To Buy Now

3. ServiceNow, Inc. (NYSE:NOW)

Number of Hedge Fund Investors In Q1 2024: 90

YTD Return: 3.1%

ServiceNow, Inc. (NYSE:NOW) is a diversified SaaS company that enables businesses to run analytics, automate software processes, and manage risk among other applications. Its latest earnings report in late May continued a trend of cloud providers missing analyst billing estimates. ServiceNow, Inc. (NYSE:NOW) missed analyst billings estimates by 0.5% and subscription revenue guidance by 3%. Following the results, TD Cowen maintained a Buy rating for ServiceNow, Inc. (NYSE:NOW)’s shares and an $870 share price target. The cautious optimism was based on comments by ServiceNow, Inc. (NYSE:NOW)’s chief operations officer, which led TD Cowen to believe that the firm’s workflow management product has the right set of tools to attract customer spending in today’s constrained environment.

The average of 17 analyst share price targets for ServiceNow, Inc. (NYSE:NOW) is $802.94. This marks a 10% upside over the recent closing price of $728.58%. The firm’s three year annualized revenue growth rate is 25.68%. Lakehouse Capital mentioned ServiceNow, Inc. (NYSE:NOW) in its Q1 2024 investor letter. According to the firm:

US-based software company, ServiceNow, 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.