Shane ObataServiceNowNOWHOLDMay 29, 2025

The problem is the operating leverage. AI is an issue--everyone is using AI to check their grammar and spelling when they post or write something. How much will you pay for that? The easy money has been made.

Reported Q3 today. Is leading the software space's comeback since the spring with shares were nearly halved. Reported an imperfect, but strong quarter with good revenues, but missed the bottom line slightly. Revenue and new customers are going their way.

NOW owns proprietary data for a lot of businesses and for them to monitor and govern that data is important. Revenue growth is 25% and margins are expanding.

Upgraded today with a price target of $180. It's an AI beneficiary, not victim, and can't be disrupted by AI. Investors are starting to agree with this point. 90% of the Fortune 500 uses NOW software.

In 2024, $160 was resistance, then in 2025 it was support. The chart is approaching $160, so we may see trouble as it coincides with the earnings report. He can't give advice on NOW. The chart will meet resistance, but it's uncertain.

Is encourage with how they're leaning into Agentic governance with new AI tool. They just got a few ratings upgrades.

Software is customized for large companies, but very expensive. Those customers will have incentives to use AI, and the cost will motivate them to build internal models. Good company, but he's not sure of the long-term outlook. FCF yield is ~3%, a bit too low for him.

He's been accumulating. Not quite cybersecurity, but helps manage computer assets. Parts of it are security-like. Has to demonstrate it's an AI winner. Can unlock AI within an enterprise, and revenue is accelerating because of that. Very strong future.

Leader in making companies more efficient. Massive fear that AI would put it out of business. Instead, has incorporated AI right across its platform. Market leader, so it's expensive. Five years from now every major company in the world will be running on an AI platform, and NOW will have a pretty big share. No dividend.

On the cutting edge of using agentic AI. His price target is $185.

One of the S&P's top performers in August. It's rebounded, like most software, after the AI scare. In fact, NOW has integrated AI into its software. Their quarterly reports this year were great.

Story looks materially better after latest results. Latest quarter provided clearest evidence yet that AI can actually make its software more valuable. Revenue growth and contracted future revenue accelerated. Raised full-year outlook. Connecting Claude directly into its platform. Momentum needs to translate into overall growth.

If the run continues, she may trim. 

Chart shows a bigger downtrend, and we're seeing higher lows. Now trying to break above the recent high. Doesn't mind nibbling, but he's concerned we're late in the cycle. A year or two ago, with this chart, he'd be super-bullish. Now you need to limit risk ~$100-105. If it takes out the lows of earlier this year, you want to exit.

But he's worried we're at the tail-end of the 4-year cycle, which means markets will come under pressure, and cyclical areas will likely bear the brunt.

The chart had a double top, fell and is now basing with slightly higher lows. It's not consolidating. Wait for the break out above $123 to buy.