4. EDP Services
Electronic data processing (EDP) services is one of the best sectors to invest in heading into next year. Electronic data processing refers to the gathering of data using electronic devices, and it is another term for automatic information processing. One of the most prominent EDP stocks that elite hedge funds are buying is ServiceNow, Inc. (NYSE:NOW), which is a California-based company that offers enterprise cloud computing solutions that define, structure, consolidate, and automate services for enterprises worldwide.
On November 17, Morgan Stanley analyst Keith Weiss said he is convinced that ServiceNow, Inc. (NYSE:NOW)’s workflow automation platform “hits a sweet spot” with organizations seeking to optimize their business processes and that the company has “strong positioning” to cater to a $175 billion market opportunity. This view, paired with what he calls its “best in class unit economics,” reiterates his confidence in ServiceNow, Inc. (NYSE:NOW) being able to see resilient 30%-plus free cash flow growth in FY23/FY24, added the analyst, who also named ServiceNow as his “Top Pick”, replacing Salesforce, Inc. (NYSE:CRM). He maintained an Overweight rating and a $520 price target on ServiceNow, Inc. (NYSE:NOW) shares.
According to Insider Monkey’s Q3 data, 103 hedge funds were bullish on ServiceNow, Inc. (NYSE:NOW), compared to 99 funds in the preceding quarter. Chase Coleman’s Tiger Global Management is the biggest stakeholder of the company, with 1.7 million shares worth nearly $640 million.
Lakehouse Capital made the following comment about ServiceNow, Inc. (NYSE:NOW) in its Q3 2022 investor letter:
“Despite a challenging environment, US-based software company ServiceNow, Inc. (NYSE:NOW) performed well and reported revenues of $1.8 billion for the quarter, up 29% year-over-year in constant currency terms. The company’s operational metrics continue to be resilient, with remaining performance obligations growing 25% year-on-year in constant currency terms, total customers with over $1 million in annual contract value (ACV) growing 22%, and renewal rates holding firm at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal, which had its best quarter ever including a $20 million-plus net new ACV win. The company now boasts 1,530 customers generating in excess of $1 million in 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. We continue to believe that ServiceNow is one the highest quality software businesses around as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
