Bots Help Lift Software Leader Near Buy Zone Ahead Of Earnings

Workflow automation leader ServiceNow (NOW) is expanding its footprint in India with the acquisition of Intellibot. And with first-quarter earnings due April 28, ServiceNow stock has secured a spot on Leaderboard as it aims to launch a new breakout.


Based in Hyderabad, India, Intellibot is a robotic process automation (RPA) company. Intellibot helps customers automate repetitive tasks for intelligent, end-to-end automation.

ServiceNow stock joins fellow software stocks Microsoft (MSFT), Adobe (ADBE) and Veeva Systems (VEEV) on IBD Long-Term Leaders.

The industry group rankings for software sector stocks are currently at the very low end of the 197 groups IBD tracks. Microsoft and Adobe (No. 155), ServiceNow (No. 158) and Veeva (No. 195) all earn failing group rankings in Stock Checkup. But the group rankings can change quickly. Six months ago ServiceNow’s enterprise computer software group ranked No. 14.

Despite the weak group rankings, ServiceNow stock is trading just shy of a 560.89 buy point in a cup with handle. Meanwhile, MSFT stock is slightly extended past its recent breakout from a flat base and Veeva has retaken its 50-day moving average as it sets up.

Adobe stock, which was featured last week in this column, is back in a buy zone.

Who Joins ServiceNow Stock, Microsoft On The Leaderboard List Of Top Growth Stocks?

The Best Mutual Funds Buy Into ServiceNow

ServiceNow’s solid track record of strong sales and earnings continue to attract the best mutual funds. In addition to posting eight quarters of rising fund ownership, 340 funds with an A+ rating from IBD have a position in ServiceNow stock.

By comparison, 443 A+ funds have reported a position in Microsoft, followed by 313 for ADBE stock and 250 for Veeva stock.

Leading money managers see how ServiceNow has delivered average annual earnings growth of 49% over the last three years. Analysts expect the company to post a 29% EPS increase when it reports April 28.

Plus, boosted by 25.3% annual pretax profit margin last year and 37.3% return on equity, ServiceNow sports an A SMR Rating.

ServiceNow Stock Resets Base Count Ahead Of Q1 Earnings

In May 2020, ServiceNow stock broke out to launch a 65% run through February of this year. As it climbed, NOW stock showed relatively tight trading, finding consistent support along its 10-week moving average.

It then pulled back and undercut the low in its prior chart pattern to reset the base count.

ServiceNow has formed a new first-stage base and is trading above its 10-week line, which has been trending lower. Look for the 10-week benchmark to begin trending higher and move more decisively above the longer-term 40-week line. Veeva stock is showing somewhat similar action as its 50-day line remains below its 200-day moving average.

While forming its current base, the relative strength line for NOW stock has slumped but is showing signs of a rebound.

It’s currently trading just 1% below the 560.89 buy point. See if a strong Q1 earnings report lifts ServiceNow stock to a new breakout. Heading into Monday’s close, the stock is up over 1%, leaving it right on the cusp of a breakout.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.


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