We recently published a list of Jim Cramer is Talking About These 10 Stocks as Markets Rebound. Since ServiceNow Inc (NYSE:NOW) ranks 2nd on the list, it deserves a deeper look.
Jim Cramer in his latest program on CNBC talked about the latest rebound in the markets followed by a major selloff on Monday, saying we can “fret” about the interest rates, jobs market or mortgage rates, or we can just buy the stocks of “tremendous” companies and hold on to them.
“Stock prices have become so dependent on the macro, the carry trade, the Fed chatter, that it’s impossible to give you a pat answer even as I’ve told you over and over again that corporate America is doing much better than anyone would expect at this point in the cycle,” Cramer said.
Cramer lamented yet again that people believe a 25bps decline in interest rates could somehow “motivate” people to increase spending and on these hopes they often buy “phony” ETFs.
Cramer also said that the Fed won’t begin to cut rates until it sees consumers “rebelling” against higher prices forcing companies to roll back price increases to pre-COVID levels. Jim Cramer believes we now have an “empowered consumer” who is willing to make choices and choose options that are cheaper and better.” He said that during the pandemic, amid higher liquidity, people were willing to accept higher prices, but not anymore.
For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s talking about. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
ServiceNow Inc (NYSE:NOW)
Number of Hedge Fund Investors: 90
A caller recently asked whether NOW is a buy, sell or hold. Cramer said “come on, it’s ServiceNow!”, recommending the caller to buy the stock.
Bank of America’s Savita Subramanian recently said in a latest note that AI “hype days are over” as he pointed out major AI tech companies that are spending huge amounts of money. The analyst said the AI has transitioned from “tell me” to “show me” and from now on companies that are monetizing AI will lead. The analyst named ServiceNow Inc (NYSE:NOW) as one of the companies that have already started monetizing AI.
ServiceNow Inc (NYSE:NOW) impressed the market with strong second-quarter results which have proved the company’s AI potential. Morgan Stanley’s Keith Weiss maintained his Overweight rating on the stock and a $900 price target, saying the AI momentum is real and continues to build. ServiceNow Inc (NYSE:NOW) said additional annual revenue from new Pro Plus edition contracts, which include generative AI features, doubled from the previous quarter. The company secured 11 new contracts worth over $1 million each. Analysts believe ServiceNow Inc (NYSE:NOW) strength is its NOW platform as it makes it easier for companies to integrate all tools and software at one place, including Salesforce, Microsoft, and SAP. The company’s portfolio has 168 digital workflow solutions with a 98% renewal rate.
In a tough environment for SaaS companies, ServiceNow Inc (NYSE:NOW) managed to raise its full-year guidance. It also raised its operating income by 50 basis points.
NOW is trading at 40 times its estimated earnings for 2025, which is not a high multiple when compared with over 20% revenue growth estimates for ServiceNow Inc (NYSE:NOW) and an increasing number of growth catalysts.
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.”
Overall, ServiceNow Inc (NYSE:NOW) ranks 2nd on Insider Monkey’s list titled Jim Cramer is Talking About These 10 Stocks as Markets Rebound. While we acknowledge the potential of ServiceNow Inc (NYSE:NOW), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
