ServiceNow: Intelligent Infrastructure

08/26/2014 8:00 am EST

Focus: STOCKS

Rob DeFrancesco

Founder, Tech-Stock Prospector

This latest addition to our Vulture Portfolio is a fast-growing provider of cloud-based solutions used to automate IT operations, explains Rob DeFrancesco, editor of Tech Stock Prospector.

There is a big market opportunity in front of ServiceNow (NOW): automating enterprise operations from the cloud.

Its solutions enable customers to operate more efficiently and profitably. Basically, the company’s offerings monetize and analyze the IT infrastructure, automating and orchestrating processes and applications.

Intelligent infrastructure learns from past behaviors to pick up on patterns, predict capacity needs and proactively make changes. Disruption of the huge installed base of technologically-weak legacy solutions is the broad goal for ServiceNow.

One important new solution for the company is HR Service Automation. Introduced last year, this system replaces the traditional method of employees barraging the human resource department with questions via email and voicemail.

Employees place help requests which are automatically assigned to designated HR specialists for fulfillment. With integrated reporting, the customer can gain insights into volume, types of request ions, and individual workloads.

A big positive is that this automated system often provides ServiceNow with a beachhead into an organization that is not quite ready for a full switch to the cloud.

Another new offering, Facilities Service Automation, automates the request and delivery of facilities’ information and services.

While facilities managers today use a variety of inefficient tools to handle the maintenance and operation of factory floors, warehouse, distribution centers, and office campuses, ServiceNow’s solution automates the whole process, directly requests to the right individual or team for quick analysis and resolution.

The Facilities solutions make things even easier for management, because it includes a feature that displays incidents and requests via floor plan visualizations.

In the June quarter, the company added 169 new customers, bringing the total count to 2,364. The renewal rate remains at 98%.

As has been the case for a long stretch of quarterly reports, ServiceNow raised its revenue outlook for the year—there is clearly a lot of upside momentum in the business right now.

The new 2014 revenue guidance range is $668 to $673 million. The firm’s revenue growth for this year and next is expected to average 48.5%. Our fair value price target of $70.15 is derived from assigning a forward multiple of 10.5 to our 2015 revenue estimate of $965 million.

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