Tevis: The Most Undervalued Stock?

What's a stock that you currently own or want to own that you think is really being overlooked still within the moment? >> All right, let me check for you. >> [clears throat] >> That's being overlooked? >> Yeah, something that's just overlooked. It's just not getting the love that it should. >> Oh man, I think uh ServiceNow could definitely be in that category. I just got into this recently. Granted, I'm not like big into ServiceNow, just a couple of percentage points. I think it's like 6% of my portfolio. Um but I you know, I want to see what they report here in a couple of weeks when they report earnings. >> Oh no, earnings are in for like 4 days. >> What's that? >> On ServiceNow, earnings are in uh four trading days. >> Next week. >> Yeah. >> Next week. >> Mhm. >> Yeah, yeah. And I think it's going to be really interesting cuz the market has sold this off as part of a basket of like AI is going to kill SaaS. And ServiceNow, their offerings, not only are they growing, not only are their renewal rates remaining fairly resilient, but I think ServiceNow is actually going to benefit from this because like they serve to some degree as that orchestration layer for AI. And the more complicated you get, especially as you get into agentic use cases, you're going to need somebody like ServiceNow if you're this massive enterprise company. And so ServiceNow does not deserve to be trading where it is. I mean, they had their worst trading day, I think, in company history when they reported last earnings. And um and then Bill McDermott came out and said, "Hey, look, like we're we're not seeing demand slow down. Oh, like this is something that's benefiting us, not hurting us." And I think that's going to be proven out in every subsequent quarter when they see in the numbers that oh, wait a minute, this is actually a resilient business model that's going to be helped, not hurt by AI. >> Yeah, it's a pretty interesting chart, you know, cuz they had such a big run back from, you know, really like a decade essentially that they just kept on going up throughout. They went from, you know, 2012 to 2021, 3,000% move, you know, 5,000 percent move when you're coming up here. Even from here to here was pretty significant going from 60 bucks to 230, but then really big drop that, you know, I think mostly happened this year. If you look, this is really the start of 2026 is like right around here. And so they were still trading at 153, so down a decent chunk from there at this moment. Can you give people you you talked about how a service now is something that's going to be required if you are utilizing agents, trying to integrate them further? Can you give people just like a couple more minutes on why this is such a fascinating business model? >> Yeah, sure. I mean, look, ServiceNow is is a B2B company, right? And it's it's essentially an orchestration layer um that enterprises can use for all of their AI systems to talk with each other. And I think that is a piece that, you know, as we move up the stack in terms of how do these systems Okay, step one is let's integrate these systems. Step two is how do these systems collaborate and work together well? For ServiceNow, like it really is about their suite of products. So, if you think about AI monetization, they're monetizing AI faster than any comparable software company out there. Their AI Their AI revenue that they have is now raised to 1.5 billion in 2026, up from 1 billion. So, they're actually making real tangible money from AI, which is completely different from what the market thinks of this business, right? You can't trade ServiceNow as well as like Adobe as well as, you know, CRM all in a basket because they're differentiated businesses. ServiceNow I mean, Bill McDermott in the last interview said that we're going to make more than 1.5 billion again. They're going to raise that AI monetization revenue from the uh projection yet again. Subscription revenue is fairly resilient. I mean, the all the fundamentals are strong. The business is growing over 20%. And now they're repositioning from workflow automation to essentially being this governance layer for all of enterprise AI. So, they're going to be running Microsoft Copilot. They're going to be running Agent Force from from Salesforce. And they're also going to be running their own custom LLMs from OpenAI, from Anthropic, and you know, Gemini, and and everybody else. They sit right now at this workflow layer that is across all the enterprise systems. And so, it really can play that governance role when these systems talk to one another. And that is a differentiated product offering that is benefited by AI, not hurt by it. >> Yeah, I think it's an important differentiation at the end. And it's nice to be able to break down, like you're saying, their revenue by People can look at the overall revenue, which has continued to grow quite nicely. It's not Nvidia type jumps, right? They're just staying consistent here. What I think is really interesting on them is they haven't missed EPS in over 4 years at this point, which is pretty impressive. Uh on the year. >> Yeah. Yeah. >> They haven't missed EPS. The renewal rates are staying very strong. The growth rates are strong staying strong. And not Don't forget, look, this is also a company that has $5 billion of share buybacks that they authorized back in January. The CEO is going out and buying shares himself. All of management, actually, if you look at the management team, they're all going and buying shares of this company themselves. Like there's many insiders that are thinking this is genuinely mispriced. And even from a company, you know, financial engineering perspective, they're authorizing buyback raises from 2 billion to 5 billion. And so, I I I do think that yeah, I mean, there are headwinds, right? They had an M&A close recently. And you could say, "Hey, we don't necessarily know what's going to happen in contracts because the contracts have a renewal date and we won't know until they let's say don't renew into the future. Um, but at the end of the day, like this is a company that serves a valid use case, is going to be benefited from the AI um acceleration. Like as we go from a Q&A for LLMs over to the agentic use case, ServiceNow is going to be more necessary, not less. And ultimately, if the demand holds up on the AI side of the house, then you're going to need governance layers in all of these enterprises cuz you're talking about companies with tens of thousands of employees. >> Yeah. Yeah, that is a really good point and I also do want to just mention for those that were looking, um I was showing quarterly data before as well. Important to put that together into full scale of years, too. When you're looking at the full year, you know, they're now doing over $10 billion in profit a year at this point. And so it's definitely sizable within the company. What's the market cap at now for that one? >> For ServiceNow? >> Yeah, where are we at? We're at a market cap of 107 billion. >> 107 billion. Which is kind of crazy. Like if you look at it, this this stock was easily double uh at the beginning of 2025. It was over double. >> Wow. >> I don't know. It's it Yeah. >> How do you How do you wrap your mind around because right now, you know, it's it's hard to look at something that has come down so much. Sometimes people see a 10, 20% dip and they go, "All right, this is attractive, right? It's come down to 200 SMA." But something cuts through it. Uh a good example right now is I think like Netflix, right? And ServiceNow and some of these pieces. Netflix hit a new 52-week low today. >> Yeah, we could talk about that actually. That's that was an interesting earnings. >> Okay, so let's talk about that. Like something like Netflix where people are like where do I buy if I'm interested in this? And how do you think about that as an investor? >> I mean, look, I think we're going to get into like a very esoteric type of conversation because Netflix is cheap, but what you got to be careful for is buying va- value traps out there. Um because like Netflix was cheap all the way back when they were in the bidding war um for for that acquisition. What was it? Was it Discovery? >> Warner Bros. Is something like >> Yeah, exactly. When they were in that acquisition talks, like Netflix got hit really hard. >> Yeah. >> And when it turned out that, you know, it's not happening, they still continued to get hit, right? I haven't seen this earnings, but the numbers were fine. Like they met expectations. I think it was on the back of guidance that they sold off. And what? They're down like 8% I think it was uh after hours. >> They Yeah, they've been getting flogged all year though. >> Netflix is down. It's at 68 bucks. Netflix is down to 2024 levels. And I mean, this is a price at $68. This is where it was at the top in in 2022 at the end of 2022. And so, how do I see this? Well, I see it as is this Do Do the fundamentals make sense from a valuation perspective? Like can I have a healthy ROI from a ratio point of view in terms of what the company is making revenue-wise, EPS-wise? I mean, it's different for different types of companies based on their maturity, number one. Number two, what are the catalysts going forward for this business? Like what can I feasibly see Netflix coming out with? Is there something around the corner that can serve as a catalyst? In most cases if I see drawdowns such as the Netflix one or the ServiceNow, like those will get me interested and I'll start to look at it more closely. But it's not that you know, I'm not pulling the trigger on everything that has a drawdown, right? Cuz I I need to have an actual bull case. I need to have an actual catalyst and a a reason why I'm buying. In the case of ServiceNow, for example, like I understand how this business could be misconstrued for something that's going to get disrupted by AI because people see it and the description is that it's a software as a service company. AI is displacing software as a service companies. Like that is a true statement across many companies that don't have a moat. However, in this particular case, ServiceNow will prove resilient and will have a moat. Now, in the case of in Netflix, what is that actual thesis? I'm not just going to buy something cuz it's cheap. Because if Netflix is trading at 50 bucks 6 months from now, I can't resort on that. I need to come back to a bull case, a reason why I bought it in the first place to say, "Okay, does this still hold or does it not hold?" Regardless of stock price, right? If I couldn't ever look at a chart ever again, what would I buy?