NEW YORK (TheStreet) -- Shares of ServiceNow (NOW) are advancing by 0.78% to $75.26 in late morning trading on Tuesday after analysts today at MKM Partners initiated coverage of the company with a "buy" rating and a price target of $90.
ServiceNow provides cloud-based solutions that define, structure, manage, and automate services.
"We believe NOW's SaaS-based platform provides a competitive advantage against the legacy IT Service Management providers and an entry to the company's larger service management strategy, which provides for a larger market opportunity, differentiation and allows NOW to be more strategic to its customers," analysts said.
However, analysts cited several risks, which include market sizing and sales execution.
Separately, TheStreet Ratings team rates SERVICENOW INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate SERVICENOW INC (NOW) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Software industry average. The net income has significantly decreased by 34.1% when compared to the same quarter one year ago, falling from -$43.31 million to -$58.09 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, SERVICENOW INC's return on equity significantly trails that of both the industry average and the S&P 500.
- SERVICENOW INC's earnings per share declined by 26.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SERVICENOW INC reported poor results of -$1.23 versus -$0.54 in the prior year. This year, the market expects an improvement in earnings ($0.19 versus -$1.23).
- NOW's debt-to-equity ratio of 0.99 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that NOW's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.64 is high and demonstrates strong liquidity.
- The gross profit margin for SERVICENOW INC is currently very high, coming in at 70.24%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -27.40% is in-line with the industry average.
- You can view the full analysis from the report here: NOW Ratings Report