Q2 STOCKS TO BUY

Buy the Dip on ServiceNow Stock

NOW shares tend to bounce on pullbacks to the 80-week moving average

Oct 23, 2019 at 12:19 PM
facebook X logo linkedin


Ahead of earnings -- slated for release after the close tonight -- the shares of ServiceNow Inc (NYSE:NOW) are swimming in red ink today, after the company said CEO John Donahoe is stepping down to head up Nike (NKE). Donahoe will be replaced by former SAP (SAP) CEO Bill McDermott. While analysts and NOW shareholders are punishing the stock, history suggests the pullback could be a buying opportunity for ServiceNow bulls.

The security was last seen 4.1% lower at $219.02, attempting to find support in the $220 area -- where NOW landed after a January bull gap. What's more, the stock is back within one standard deviation of its 80-week moving average, after trading north of the trendline at least 80% of the time over the past 20 weeks. Over the past 15 years, there have been five similar pullbacks for NOW shares, after which the equity was higher three months later 80% of the time, averaging a gain of 19.2%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. From the stock's current perch, another 19.2% jump would put NOW shares back around $261.

NOW stock chart 1023

In light of the C-Suite shake-up, no fewer than three brokerage firms cut their price targets on NOW. Specifically, Mizuho, Evercore ISI, and Baird trimmed their targets to $230, $285, and $275, respectively, from previous targets north of $300. Meanwhile, Canaccord Genuity said that ServiceNow shares remain a "buy" for now, but warned that "change is rarely an ally to valuation -- especially in a sector in retreat." The brokerage firm also said it believes the software sector in general is "certainly much closer to bottoming out, [but] is not done going down."

As far as earnings history, it's worth noting that NOW shares have moved higher the day after seven of the last eight earnings releases, including the aforementioned one-day 13.4% surge in late January. On average, the stock has moved 4.9% in the session after earnings, regardless of direction, looking back two years. This time around, the options market is pricing in a bigger 8.3% swing for NOW.

Ahead of the known event, it's not surprising that ServiceNow's short-term options are fetching a pretty penny. The stock's Schaeffer's Volatility Index (SVI) of 56% stood in the 96th percentile of its annual range, as of last night's close. As such, speculators expecting support to come into play for NOW shares may want to consider selling to open puts instead of buying to open calls, or waiting to buy premium after earnings.

 
 

“Buy This Stock Now!” - Expert Who Called 11x On TSLA

He called a rare 11x on Tesla…

But now, thanks to Elon & Trump’s new alliance…

He says there’s a new opportunity that could be 1,000x BIGGER than Tesla – and it could completely revolutionize a $23 Trillion market.

It’s trading for less than $5 per share right now…

But it won’t be under the radar for long.

Discover The 1,000x Bigger Elon Opportunity Here

GRAND SLAM COUNTDOWN

 
 

Featured Articles from Trusted Partners:

👀Learn How Dividends Create Passive Income for Life
Receive $200 Off Motley Fool Epic. The Motley Fool Epic $299 discounted offer is based on $499/year list price. Introductory promotion for new members only. Take control of your money and your portfolio with Motley Fool Epic.

💵New Income System Could Pay You $4,243 Monthly
You could collect an average of $4,243 per month starting as early as next week with a new payout system for income investors. New registrations are being accepted for investors who want to be in a position to start with their first payout next week.

🚀Easy 92% Crypto Dividends (No Coins Required)
COIN stock doesn't pay a dividend... But there's actually a new way to collect a massive dividend that's indirectly based on the stock and offers a terrific monthly income (currently yielding nearly 92% on a forward basis).

🤝Free Advisor Match with Wiseradvisor.com
Don't leave your retirement to chance! Get matched with a trusted financial expert for FREE and make the most of your tax refund. Get started now.

⚠️Dennis Quaid's #1 Warning for Americans
Here's the thing: life doesn't come with guarantees. The economy shifts, markets stumble, and years of hard work could slip through your fingers like sand. But it doesn't have to be that way for you. So request a free copy of this Gold & Silver Guide that will arrive right to your doorstep when you act now.

 

 
 

Follow us on X, Follow us on Twitter