The brokerage firm is betting on ServiceNow stock's short-term fundamentals
The shares of ServiceNow Inc (NYSE:NOW) are up 2.9% to trade at $478 at last check, after Goldman Sachs added the workflow platform name to its "Conviction Buy" list. The analyst in question noted the company's improving fundamentals in the short-term, as well as the strong potential it has to increase revenue through subscription services.
The equity has had an incredibly volatile run on the charts over the past six months. After shares surged all the way to a Feb. 8, all-time high of $598.37, they came crashing down to the $448 mark in May -- its lowest level since September. While the security is now firmly below the 40-day moving average, it still sports a 15.7% year-over-year lead.
Analysts are majorly optimistic towards ServiceNow stock, with 20 of the 23 in question carrying a "buy" or better rating, while the remaining three say "hold." Plus, the 12-month consensus target price of $606.66 is a whopping 25.4% premium to the equity's current perch.
The options pits echo that optimism, with a strong appetite for calls. This is per NOW's 10-day call/put volume ratio of 2.63 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands in the 93rd percentile of its annual range. This means calls are getting picked up at a faster-than-usual pace.
What's more, NOW options are inexpensive at the moment. The equity's Schaeffer's Volatility Index (SVI) of 27% sits in the extremely low second percentile of its 12-month range. In simpler terms, option players are pricing in low volatility expectations right now.