Actions for Service now (NYSE: NOW) and Holdings reached (NASDAQ: UPST) both experienced substantial growth in 2021 before finding themselves caught in a massive sell-off towards the end of the year. The popularity of both tech stocks arguably priced them to perfection before the bear market hit.
However, earnings growth for both companies remains robust and falling stock prices should make them attractive to more investors. Such conditions could set them in place to recoup some lost gains, possibly causing hypergrowth again in 2022 and beyond.
1. Service Now
ServiceNow is a SaaS company that uses software to manage workflows and digital operations. This has attracted nearly 1,300 customers who spend over $ 1 million annually, a 25% increase from last year.
However, companies such as Selling power also competing in this industry. This could lead to the question whether customers and shareholders should choose ServiceNow over its competitors. Customers tend to choose ServiceNow for its simplicity and scalability. ServiceNow also allows users to manage workflows from anywhere, connecting the people, functions and systems needed for operations.
While Salesforce can make similar claims, ServiceNow is also adding financial services operations to its platform, something Salesforce customers must purchase separately. ServiceNow also offers free 24/7 customer support, a benefit that comes at an additional cost when using Salesforce.
This likely helped ServiceNow generate nearly $ 4.3 billion in revenue in the first nine months of 2021, a 31% increase from the first three quarters of 2020. It far exceeds the company’s forecast. reportLinker technology data, which estimates compound annual growth. 13% rate for the SaaS industry through 2025. While analysts forecast a 26% revenue increase in 2022, ServiceNow’s growth is expected to stay far ahead of most of its peers.
In addition, net income of $ 204 million for the first three quarters of 2021 doubled compared to the same period in 2020. An improvement of other income of $ 36 million came from the reduction in losses on debt extinction, while ‘A $ 21 million reduction in income taxes compared to the same time last year increased the percentage growth from the bottom line.
The ServiceNow share price rose 18% in 2021, slightly outpacing Salesforce’s 14% gain. Still, it has grown by around 625% over the past five years. Additionally, the price-to-sales (P / S) ratio of 21 may seem high when Salesforce sells nine times the sales. Nonetheless, with a growing number of high income clients drawn to its platform, ServiceNow is expected to increase investor returns over time.
Upstart works with banking partners to provide fixed rate unsecured personal loans to its clients. The company sets itself apart from other lenders by the way it filters loan applications, relying on an artificial intelligence filtering system created by its founders, who are veterans of the tech industry. Instead of relying on the traditional FICO credit system, it uses AI to determine whether to grant a loan. His process led to more than $ 13.6 billion in loan issuance in June 2021, with 71% of loans being made through Upstart’s fully automated process.
The company continues to expand its services to other lenders. In addition, it has recently extended the types of loans it manages to include auto loans. Now Upstart Auto Retail acts as both sales and loan creation software, lines of business that could dramatically increase revenue over time.
So far, total revenue stood at $ 544 million in the first three quarters of 2021. This is up 270% from the first nine months of 2020. This has translated into a income of $ 76 million for the first nine months of 2021, well above $ 5. million earned over the same period in 2020. Limiting the increase in operating expenses to 219% was the main reason for the massive profit growth.
Analysts don’t expect Upstart to maintain its 2021 growth rate. Nonetheless, if it is close to reaching the consensus estimates for revenue growth in 2022, now at 49%, it could help. to stimulate the stock.
Another reason the stock might rise is its recent history. Although the Upstart share price jumped 270% in 2021, it fell almost 70% from the peak in October. A massive sale of technologies and a high multiple probably explain this drop. Upstart is now selling at a P / S ratio of 18 after trading over 60 times sales in September.
Nonetheless, the lower valuation could make it more attractive to investors looking to buy into this growth story. With income growth levels remaining high, Upstart stock is poised for further growth.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.Source link