In this article we discuss the 5 best software stocks to buy according to billionaire Paul Tudor Jones. If you want to read our detailed analysis of Jones’ history and hedge fund performance, go directly to the 10 Best Software Stocks to Buy According to Billionaire Paul Tudor Jones.
5. ServiceNow, Inc. (NYSE: NOW)
Value: $6,987,000
Percent of Paul Tudor Jones’ 13F Portfolio: 0.197%
No. of Hedge Fund Holders: 96
ServiceNow, Inc. (NYSE: NOW) specializes in the development of cloud computing platforms used by companies to digitize workflow.
ServiceNow was recently named a leader in the 2021 Gartner Magic Quadrant for Enterprise Agile Planning (EAP) tools. The company has been recognized in the last three years for its IT Business Management (ITBM) product suite, but this is the first time the company has been named as an industry leader.
ServiceNow Q1 2021 revenue was up 30.8% YoY to $1.36 billion, while GAAP EPS was $0.41, beating estimates of $0.12.
ServiceNow, Inc. (NYSE: NOW) has announced plans to acquire Intellibot, a robotic process automation company that customers will use to automate repetitive tasks and bolster ServiceNow’s hold on the Indian market.
Alex Zukin analyst at Wolfe Research initiated coverage on ServiceNow and gave it an “Outperform” rating with a price target of $270.
Baron Opportunity Fund, in its Q1 2021 investor letter, mentioned ServiceNow, Inc. (NYSE: NOW). Here is what Baron Opportunity Fund has to say about ServiceNow, Inc. in its letter:
“We believe short-term focused investors and consensus often miss the longer-term strength and durability of growth and business-model efficiency (earnings and free cash flow margins) of truly special businesses. An example of this is ServiceNow, a SaaS-industry leader and pioneer, and a long-time Fund investment. As shown in the table below, over the seven years from March 2014 through March 2021, ServiceNow experienced eight multiple declines that averaged –32%, ranging from a low of –19% to a high of –52%.
But during that period, ServiceNow demonstrated compounding revenue performance and stronger operating leverage and FCF generation than expected by consensus. The table below shows the first quarter 2014 projections of one of the top software analysts on the Street, Keith Weiss of Morgan Stanley, versus what ServiceNow achieved.
As you can see, over this three-year period, ServiceNow beat revenue expectations by $315 million, or 29%, and generated FCF margins of 23%, trouncing estimates by $186 million, or 138%.The compounding effects of seven years of strong revenue growth and FCF generation drove ServiceNow’s share price to increase from $70.03 on March 5, 2014 to $500.11 on March 31, 2021, a 32% annualized return. A 7-bagger!
ServiceNow delivered these point-a-to-point-b returns despite the eight multiple pullbacks described above, including the one that occurred towards the end of the first quarter. The power of faster-for-longer, cash-generative business models.”
