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Realizing that more big customers than ever are paying bigger dollars for ServiceNow ( NOW ) software in the cloud, investors bought up ServiceNow stock Thursday, healing much of the pain that they endured through the infamous Software Slump of January and February. ServiceNow stock shot up 18% in morning trade on the stock market today before easing back to a 15% gain, near 74.50, Thursday afternoon. It’s 18% off a record high at 91.28 set Dec. 4, but it’s more than 60% up from the nearly two-year low of 46 reached Feb. 8. ServiceNow late Wednesday issued first-quarter earnings and sales that exceeded Wall Street estimates. Shares of rival SAP ( SAP ) were down a fraction Thursday afternoon, but Salesforce.com ( CRM ) stock was up 1%. “We now have 249 customers each paying us more than $1 million in annualized contract value, an increase of 48% year over year,” ServiceNow CFO Michael Scarpelli said in the company’s earnings release. “We also landed a record 13 upsells in the (first) quarter, each with an annualized contract value greater than $1 million.” Those results helped drive Q1 revenue up 44% to $350.9 million vs. the $301 million expected by analysts polled by Thomson Reuters. Non-GAAP (generally accepted accounting principles) EPS rose to nine cents from a penny in the year-earlier quarter. Analysts had expected seven cents. Excluded from the adjusted earnings, among other things, were $270 million in legal expenses to settle patent infringement lawsuits that BMC Software and Hewlett Packard Enterprise ( HPE ) brought against ServiceNow. It brought the bottom line to a $333 million net loss vs. $58 million lost a year earlier, or a $2.06 GAAP loss per share vs. a 38-cent loss in 2015’s Q1. Analysts and investors prefer to concentrate on the apples-to-apples non-GAAP comparisons. William Blair analyst Justin Furby reiterated his firm’s outperform rating on ServiceNow without a price target, though he said, “The stock can double (or more)” over the next five years. “All other first-quarter metrics (revenue, non-GAAP operating margin, non-GAAP EPS, deferred revenue, free cash flow) came in ahead of guidance and the Street, and the company’s second-quarter billings outlook of 31%-33% growth (37%-39% subscription billings growth) bracketed the consensus view of 32%,” said Furby in a Thursday research note. Canaccord Genuity analyst Richard Davis maintained a buy rating with a 90 price target on ServiceNow. “We believe full-year guidance is likely conservative and sets the company up to outperform for the remainder of the year,” he said in a Thursday note. FBN Securities analyst Shebly Seyrafi raised his price target on ServiceNow stock to 90 from 80. Scalper1 News
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