Dreamstime
shares are losing ground after the workflow-management software company posted solid first-quarter results, but provided guidance that left the Street a little confused and disappointed.
For the quarter, ServiceNow (ticker: NOW) reported revenue of $1.36 billion, up 30% from a year earlier, and slightly ahead of the Wall Street consensus of $1.34 billion. Subscription revenue, accounting for most of the total, was $1.29 billion, slightly ahead of guidance at $1.27 billion. Subscription billings were $1.37 billion, up 29%. Profits on a non-GAAP basis were $1.52 a share, ahead of the Street at $1.34 a share, while under generally accepted accounting principles, ServiceNow earned 41 cents a share..
ServiceNow is projecting second-quarter subscription revenue of $1.29 to $1.295 billion, up 27%-28%, and below the $1.305 billion Wall Street consensus. For the full year, the company now sees revenue of $5.463 billion at the middle of its guidance range, slightly below the previous figure of $5.49 billion. The middle of the range of forecasts for subscription billings is also slightly lower, at $6.198 billion, compared with $6.215 billion.
Citi analyst Tyler Radke said in a research note that after a strong end to 2020, the company had a “more controversial Q1 and outlook,” noting that management’s forecast for both the second quarter and the full year missed expectations, due to a combination of foreign-exchange and revenue-recognition issues.
“It looks …like mainly noise to us, but with ServiceNow a significant outperformer in 2020 and increased investor scrutiny on growth software prints, we could see how the stock could be weaker in the near term,” he wrote. Radke kept a Buy rating on the stock, but lowered his target for the price to $639, from $665.
The stock was down 7.3%, to $516.60 near midday.
Needham analyst
Jack Andrews
likewise kept a Buy rating on the stock, while trimming his price target to $591 from $595. He says the quarter had a lot of moving pieces that likely left investors wanting more.
“The good news for investors is that the forthcoming analyst day on May 10 should provide greater clarity and transparency on ServiceNow’s underlying growth drivers and medium-term financial outlook, which we believe will provide support,” he wrote. “Thus, we believe a near-term buying opportunity is at hand, as our broader thesis on ServiceNow’s ability to capitalize on digital transformation initiatives is unchanged.”
