Stock-Split Watch: Is ServiceNow Next?

Core Viewpoint - ServiceNow's stock price has significantly increased, raising questions about the potential for a stock split, despite the company never having performed one before [1][2][10]. Group 1: Stock Performance - ServiceNow's stock has more than doubled in the last two years, outperforming the S&P 500 index, which rose by 45% during the same period [1]. - Over the last decade, ServiceNow investors have seen gains of 1,360%, compared to the broader market's 181% [2]. - The company generated $3.1 billion in free cash flow from $10 billion in top-line sales over the last four quarters, indicating strong financial performance [8]. Group 2: Stock Split Considerations - Stock splits can make shares more accessible to investors, particularly those with limited budgets, and can enhance stock-based compensation management [4]. - A potential 10-for-1 stock split could lower the share price below $100, which might convey confidence in the company's future [8]. - Despite the potential benefits, stock splits do not create additional value for shareholders, as they merely change the number of shares without altering ownership [5]. Group 3: Current Market Context - ServiceNow's shares are currently trading at high valuations, with a price-to-earnings ratio of 161 and a free cash flow multiple of 59, suggesting that a stock split may not be necessary at this time [9]. - The company has not indicated any plans for a stock split during earnings calls, and the current high stock price may not warrant such a move [8][11]. - A stock split might be more beneficial if the stock price were to decline significantly, potentially boosting morale among investors and employees [10].