Why ServiceNow Is a Must-Have in Your Investment Portfolio

In 2022, investors reacted to rising interest rates by selling their shares of high-growth stocks, such as (NYSE: NOW), and buying stocks in more stable sectors, such as utilities and healthcare. This trend occurs because high-growth stocks are more sensitive to interest rate movements. When interest rates rise, the cost of borrowing money increases, making it more expensive for companies to invest in their businesses, leading to lower earnings growth, which can hurt the stock prices of high-growth companies. As a result of this trend, ServiceNow's stock declined 40% last year.

As investors began seeing the light at the end of the tunnel for the Federal Reserve ending its relentless interest rate hike campaign in 2023, positive sentiment returned to high-growth software stocks, and investors began valuing companies like ServiceNow much higher. Consequently, the stock price is up 45% year to date, compared to the S 500, up only 16%.

Despite worries by some about a potential global economic decline that could result in reduced IT spending and adversely affect ServiceNow's revenue growth, investors who prioritize growth should consider purchasing the stock. That's true even after its recent big price move this year. Here's why.

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Source Fool.com