ServiceNow (NASDAQ: NOW) revealed in an SEC filing that its CEO William McDermott sold about $25 million worth of shares. The market retreated on the news, but the ultimate takeaway is, so what? Insiders own a slim 0.28% of the company, and he’s not the only one trimming their holdings.

At least three insiders, a director or two, the general counsel, and the CFO have all sold shares in the last year, and it doesn’t matter. Their sales are offset by a large and growing institutional holding backed by analysts' sentiment. What this means for investors is the knee-jerk reaction to the sale news is an opportunity to buy more shares. 

On the institutional end, they’ve been net buyers for the last 2 consecutive quarters and six out of the last seven and own more than 86% of the stock. Assuming this trend continues, there should be a fairly firm floor in share prices around the $435 level. Regarding the analysts, the analyst sentiment has slipped to a Moderate Buy from a Firm Buy, and the price target has also fallen.

The takeaway is that recent activity, in the wake of the Q4 earnings report, is tilted to the upside and has the low end of the price range firming while higher price targets fall out of the data set. As it is, the analysts expect about a 13% upside, which puts shares near the $517 level. 

ServiceNow Poised For Growth In 2023

The worst thing to be said about ServiceNow’s Q4 results is that they are mixed, and revenue was only as expected. Other than that, the company reported a 20% gain in YOY revenue which was supported by a 22% increase in subscriptions and performance obligations. The CFO noted the sales mix driving the gains was also favorable, including fewer early renewals relative to past quarters, which is an opportunity to drive further expansion as the year progresses.

The company’s margins were also impressive, driving $2.28 in adjusted earnings which is up YOY and $0.21 ahead of the consensus. The best news is that net income is up 28% versus the 20% topline growth, and FCF is up 50%. 

“ServiceNow continues to perform as a beyond-expectations company,” said ServiceNow Chairman and CEO Bill McDermott. “Our Q4 surge in new business shows that the secular tailwinds of digitization aren’t going anywhere. We are driving net-new innovation, fast growth, and operating leverage. The world works with ServiceNow as the end-to-end platform for digital transformation.”

Looking forward, the company is expecting substantial growth in both revenue and FCF for 2023. The guidance calls for another 22.5% to 23.5% increase in revenue, with FCF growing by a more robust 30%. This news was expected by the market but plays into the idea the pullback in prices is a knee-jerk reaction and an opportunity to buy more shares, not sell.  

The Technical Outlook: ServiceNow Bottomed, Now What? 

The price action in ServiceNow bottomed in late 2022 and may continue higher. The near-term downdraft sparked by Q4 results and amplified by insider sales is consistent with the bottom and a possible reverse. If the market hits support at or near $430 (or higher) it may bounce up to the $500 level. If it can get above that level, it may go even higher, possibly up to $517 as the analysts think. If not, this stock may remain rangebound at current levels until more news comes out.