$NOW: fundamental analysis and my strategy (PORTFOLIO)ServiceNow, Inc.BATS:NOWColdBloodedCharterThe previous post was all about the charts. This one is about what matters most for anyone considering holding NOW for years: the fundamentals. POSITION #6: NOW – Fundamental Analysis First of all, I've always found the endless war between value investors and technical analysts a bit ridiculous. I don't see any reason why the two can't be combined. The goal is always the same: buy the best assets at the lowest possible prices. That's why scaling into positions in multiple tranches and taking partial profits for "chart reasons" is standard practice on this blog. Sometimes the market gets overheated, sometimes a position becomes technically extended, and reducing exposure simply makes sense. I think this approach speaks for itself, and there are plenty of examples of it throughout this blog. One of the greatest value investors of all time was Charlie Munger. Most people remember him as a critic of technical analysis, yet there is a quote often attributed to him (I couldn't find an original source, only references on financial websites such as Yahoo Finance and others) suggesting that buying quality assets near their 200-week moving average will outperform the average S&P 500 return over time. Whether he actually said it or not, the logic is sound. The 200-week moving average is often where some of the best long-term opportunities emerge because it represents a major support zone. As a side note, MSFT is currently trading close to its own 200 WMA, but that's a topic for another post. Which brings us to $NOW. The stock is currently trading roughly 32% below its 200-week moving average. The key question is simple: Is this a sign of weakness, or the buying opportunity of the year for a high-quality business? From my perspective, there are two major reasons behind the decline. The first is fear surrounding AI. Many investors seem convinced that AI will eventually cannibalize a significant portion of ServiceNow's business. The second is purely technical. The January 2025 peak looks like a classic late-cycle market top, the kind of euphoric excess where buyers chase price simply because it keeps going higher. On top of that, capital has been rotating out of traditional software and IT services into AI, infrastructure, and high-growth technology names. In other words, I believe most of the decline has been sentiment-driven. Fear. The fundamentals tell a completely different story. If anything, they suggest that AI is not a threat to ServiceNow. Quite the opposite. AI integration appears to be becoming one of the company's most important growth drivers for the next several years. Charts down. Fundamentals up. That's the simplest way I can summarize my view. Revenue continues to climb. Free cash flow continues to climb. EBITDA continues to climb. Profits continue to climb. Operating expenses are rising as well, but at a slower pace than revenue and earnings. Even more importantly, backlog growth is outpacing revenue growth. That matters. Now to what I consider the core of the entire thesis. The strongest evidence against the "AI will destroy ServiceNow" narrative comes from subscription revenue. The latest earnings report showed subscription revenue growing 22% year-over-year. Customers are not leaving. And that leads directly to another factor that cannot easily be measured on a spreadsheet: Moat. ServiceNow primarily serves some of the largest organizations in the world. Roughly 80% of Fortune 500 companies rely on its platform, including firms such as NVDA, whose CEO recently suggested that the market is significantly mispricing $NOW. The company also serves thousands of public institutions, government agencies, hospitals, and organizations such as NATO. At the same time, ServiceNow continues expanding its product offering into HR workflows, financial workflows, automation, AI-driven processes, and enterprise data management. The deeper the integration becomes, the stronger the moat gets. ServiceNow sits at the center of critical business operations. It has access to sensitive workflows and mission-critical processes. For many customers, replacing ServiceNow would be expensive, disruptive, risky, and potentially operationally dangerous. That's the moat. And in my view, it is the single strongest part of the investment case. The numbers are impressive, but the moat is what gives me confidence to hold these shares for years. The charts, meanwhile, suggest that today's prices are highly attractive. And they may become even more attractive in the near future. As discussed in previous posts, I'm closely watching the U.S. Dollar Index (DXY). If the dollar manages to reclaim an uptrend and break above 101, capital could continue rotating toward bonds and defensive assets, draining liquidity from equities. Beyond the fundamentals, I always pay attention to insider activity. The most important observation here is the absence of significant discretionary insider selling. And the cherry on top remains CEO Bill McDermott's purchase of roughly $3 million worth of shares with his own money near $104.6. As for me? Average position cost: $95.3. Full conviction in the business. Full willingness to see lower prices in the near term. Most investors fall in love with positions when they're going up. We all enjoy the dopamine. But the best investments usually come with short-term or even medium-term discomfort. Quality assets should become more attractive as they become cheaper. That's a philosophy I strongly believe in. Time will tell whether the chart is right and the fundamentals eventually deteriorate... Or whether the fundamentals are right and the chart eventually catches up. I lean strongly toward the second scenario. I'm also keeping one eye on the long-term horizontal support zone that has held since 2020, roughly between $68 and $71. Two and a half tranches currently in the portfolio. Core position. Highly undervalued asset. Next earnings report is exactly one month away, and those numbers will matter. This blog is not financial advice. 💙👽