AI stock ServiceNow (NOW) is in the closely watched group of artificial intelligence stocks and holds a spot on the IBD Breakout Stocks Index. The company teamed up with AI leader Nvidia (NVDA) to expand its AI offerings.
IBD 50 member ServiceNow also earned its place on the IBD Big Cap 20 and Leaderboard’s Leaders Watchlist.
Stock To Benefit From AI Expansion
Santa Clara, Calif.-based enterprise software maker ServiceNow joined forces with Nvidia and Accenture (ACN) on an endeavor called AI Lighthouse on July 26 to accelerate adoption of business AI software.
Lighthouse enhances ServiceNow’s Now Platform, a workflow automation system used by pharmaceutical, financial services, manufacturing and health care companies.
ServiceNow’s Now Assist is the company’s generative AI tool built into the Now Platform, which is touted to reduce manual labor tasks, reduce errors and increase efficiency.
ServiceNow’s business consists of four pillars: technology, customer and industry, employee and creator. Its workflow capabilities connect departments, systems, data storage silos and automating processes, and allow employees to work from anywhere.
ServiceNow shares the No. 1 ranking with Workday (WDAY) out of 127 stocks in the enterprise software group; both stocks have best-possible 99 IBD Composite Ratings. The group ranks No. 34 out of the 197 IBD industry groups.
AI Stock Nears A Buy Point
NOW stock is in a shallow cup base and nearing the 614.36 buy point, which is also the 52-week high from July 19. The stock’s relative strength line hit a 52-week high, as shown by the blue dot on MarketSmith charts.
The AI stock reclaimed its 50-day moving average on Aug. 25, as tech stocks rose in sympathy with Intuit (INTU) and Autodesk (ADSK) following strong earnings reports.
Shares gained 1.1% on Tuesday in light volume, putting NOW’s win streak at seven days.
The stock has gained around 54% so far this year, easily outperforming the S&P 500’s 17% and Nasdaq composite’s 34% increases.
Strong Earnings Expected To Continue
ServiceNow reported higher-than-expected second-quarter earnings and sales on July 26. Profit grew a healthy 46% on 23% revenue growth.
The company expects 23%-23.5% subscription revenue growth in the third quarter, and 24% for the full year.
ServiceNow raised its Q3 operating margin guidance to 27%, above analysts’ 26.4% estimate. The company raised its full-year operating margin guidance to 26.5% from 26%.
Mutual funds have been adding shares, with 3,378 funds owning the AI stock in June, up from 3,277 in March. Those include IBD Mutual Fund Index components Franklin Growth Fund (FKGRX), MFS Growth (MFEGX) and Fidelity Contrafund (FCNTX).
IBD Breakout Opportunities ETF
The IBD Breakout Opportunities ETF (BOUT) from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this fund allows you to invest in the entire index in addition to, or rather than, buying individual stocks. Learn more here about the ETF and Innovator.
Follow Kimberley Koenig for more stock market news on X, the platform formerly known as Twitter, @IBD_KKoenig.
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