Shane ObataServicenowNOWHOLDMay 29, 2025

Tech hit a bottom last Monday with peak pessimism, and started to rebound last Monday. Earnings growth is 20% and revenues are growing--the fundamentals haven't changed and earnings have not revised. He just bought shares.

Trades at a cheap 26x for a great growth stock, but SAAS stocks are now bearish. More turbulence will come.

He'd never bet against the CEO, but at the current price offers value.

Makes business more efficient using AI. Lumped in with SaaS. Tremendous earnings last month, strong guidance going forward. Yet market's taken stock down ~20% this year. Buying opportunity. No dividend.

High-quality, internet-based companies that use AI will do very well. Leader in the space. Suspects it will come back, he just hasn't done enough work on it. He owns MSFT.

For the Canadian telcos, regulatory challenges won't go away. In response, the telcos pledged to invest in rural areas, but those areas now have Starlink. Also, Freedom Mobile and Quebecor have added a lot more competition. The telcos won't bounce back anytime soon.

He just added it. NOW is two standard deviations below its valuation. He sees AI adoption as a complement, not substitute to NOW. It's time to start picking at names that have been beaten. This will be a winner. It now trades around 25x PE, down from 50-60x a year ago. He will add more if this falls further.

There is tremendous opportunity in software, but it won't see a V-shaped recovery. The NOW CEO just bought many shares last week. NOW has a strong moat.

Is -34% this year. Earnings growth expected at 19% this year. Trades at only 24x PE, down from 70x at end-2024. They just announced a big share buyback. 

Software stocks have been hit hard, because the market believes that AI will replace their service. He didn't like NOW at $200 a year ago, but likes it lot more now at $118. Last year, he started writing puts on this.

Anything software has getting punished now over fears that AI will replace it. But NOW just reported a good quarter, beating on every key line. PE has fallen from 64x to 28x. Likes it, but he doesn't blame anyone avoiding software stocks.

Business software stocks have been hammered by the market feeling that they will taken over by AI, but we haven't seen this in the company earnings. NOW shares are -45% from last year's peak. They just delivered a good quarter and a $5 billion share buyback.

It reports Wednesday. Business remains good, but enterprise software stocks have been hit in recent years due to AI. NOW is -41% the past year. The CEO must explain that this is a broken stock, not broken company.

He added more, despite NOW hitting a 52-week low yesterday. It's probably reached peak pessimism. It will separate from the pack, because its moat because CTO's won't introduce new AI start-ups that are supposed to disrupt the data space with companies they've been building in Silicon Valley in recent years. Also, NOW's earnings and free cash flow are growing, so it's growing into its high valuation.