Tech Stocks Soar: Is a Stock Split on the Horizon for ServiceNow?
The Rise of Artificial Intelligence
Last year, the tech sector experienced a remarkable surge, driven largely by the growing excitement surrounding artificial intelligence (AI). One company that benefited significantly from this trend was enterprise software giant ServiceNow (NYSE: NOW). Its shares skyrocketed by 50% in 2024, outperforming both the S&P 500 index and the Nasdaq Composite.
A Prime Candidate for a Stock Split
With its stock price hovering around $1,000 per share, ServiceNow is an ideal candidate for a stock split. But what exactly is a stock split, and how does it work?
Demystifying Stock Splits
A stock split is simply a financial engineering exercise that adjusts a company’s share price and outstanding share count. For instance, if a company announces a 10-for-1 stock split, its share price would decrease by a factor of 10, while its outstanding share count would increase tenfold. This change would leave the company’s market capitalization unchanged.
ServiceNow’s Impressive Performance
Since its initial public offering (IPO) in 2012, ServiceNow’s stock has gained an astonishing 4,000%. Currently trading near all-time highs, the company’s share price may be perceived as expensive by retail investors. A stock split could make its shares more accessible to a broader range of investors.
Why ServiceNow Needs a Stock Split
As a growth stock, ServiceNow is focused on customer acquisition and cross-selling to drive revenue growth. This focus can lead to volatile profitability trends, making it challenging to value the company using traditional metrics like price-to-earnings (P/E). Instead, we can use the enterprise value-to-revenue (EV/Revenue) ratio to value ServiceNow. Despite its premium valuation, the company’s strong position in the AI-driven enterprise software market suggests it may be undervalued.
A Compelling Opportunity for AI Investors
Regardless of a potential stock split, ServiceNow presents a compelling opportunity for AI investors. Growth investors and those with a long-term horizon may want to consider a position in ServiceNow, as the company continues to ride the tailwinds of a bullish AI narrative.
Don’t Miss Out on the Next Big Opportunity
Our expert team of analysts has a proven track record of identifying companies poised for significant growth. On rare occasions, they issue “Double Down” stock recommendations for companies that are about to take off. Don’t miss your chance to invest in the next big opportunity.
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