Servicenow (NOW)

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.

In time, the CEO will execute and the stock will recover from its 52-week low currently. The balance sheet is in great shape and revenues are growing, but momentum is poor. Would not add now. Software is in the dog house.

Software names are down. NOW is -30% the past 6 months. He can't call a bottom on it.

Hardware companies are beating the software ones, and this trades at a high 42x PE. Shares slid on Friday, but didn't bounce back today. Software is struggling with AI now.

In his portfolios, certainly less than 10% (and maybe even less than 5%) in software stocks. A lot of generative AI is displacing the magic that comes from these software companies. Look for places to get out. Chart shows it's consolidating; there may be another leg higher, but it's too early to make a call on that.

ITSM (IT service management) platform. Integrated into the IT department of a lot of Fortune 500 companies. Implementing a lot of AI solutions at these companies, so this name actually benefits from the AI disruption. Free cashflow compounder for a very long time. 

Has shown some of the most durable revenue growth in the entire market. Though more expensive, definitely likes it more than CRM. Deserves the valuation premium because it executes so well. Good long-term hold. Over time, need to see traction around AI for the story to continue working. Great company.

Dangerous name to be out of. Huge run, strong Q1. Reinforced leadership in enterprise AI. Guidance is in line. Concern about government cuts, but overall average deal size up by 1/3. 18% growth, but trading at 40x 2026 and 33x 2027. A bit expensive PEG ratio. Have to pay up for good names, but wait for better entry when PEG closer to 1.

Today they delivered a rock solid quarter including beating non-GAAP revenues, and reiterated their full-year forecast and this quarter despite this volatile environment. It's enough to turn this stock around.

Is the king of workflow automation, so it's perfect for Agentic AI, the next wave in AI. Last January, they said that AI is making them money. He targets $1,159.

Is down nearly 20% in the last 3 weeks. With 21% revenue growth and 18% EPS growth, they continue to monetize AI.

They're monetizing their AI tools.