Why ServiceNow Stock Bumped Higher on Monday
Key Points
The enterprise software specialist made an elite list compiled by a well-known investment bank.
The bank's analysts believe ServiceNow has wide scope for expansion.
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A wobbly stock at the end of last week, ServiceNow (NYSE: NOW) seemed to be finding a better balance at the beginning of this one. Investors cautiously bought shares of the stock on Monday, sending its price nearly 1% higher and notching a slight victory over the S&P 500 index's 0.5% rise. Inclusion on a "best of" list compiled by a top investment bank was a key factor in the rise.
An enterprising company
That morning, Goldman Sachs added three names to its U.S. Conviction List, including ServiceNow (the other two joining it are delivery specialist DoorDash and energy company Golar LNG).
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Goldman's team of analysts, led by Steven Kron, waxed bullish about ServiceNow's potential to expand its offerings into other segments of the enterprise software market. According to reports, pundits believe it can capture market share in areas such as customer relationship management (CRM) and human resources.
With such scope for expansion, the investment bank is estimating that ServiceNow could post an organic compound annual growth rate (CAGR) of roughly 20% through 2029.
Hidden attributes
Goldman points out a significant (and to some extent, hidden) advantage of ServiceNow and its business model -- it's readily expandable into other functionalities where businesses often struggle to become (and remain) efficient. Over the years, I believe, ServiceNow has done a solid job selling its products and services to clients, and when and if it pushes into those new segments, it should be similarly successful. Goldman's bullish analysis is justified.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash, Goldman Sachs Group, and ServiceNow. The Motley Fool has a disclosure policy.
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