By Sam Boughedda
ServiceNow (NYSE:NOW) shares tumbled Tuesday after the company's CEO, Bill McDermott, was cautious when speaking about the macroeconomic environment during a TV appearance.
McDermott said "macro cross winds (are) blowing strong" due to rising interest rates, ongoing strengthening of the US Dollar, war in Europe, increasing energy costs, and cyber-security threats.
ServiceNow shares are down more than 10% following the comments.
In a note to investors, Stifel analysts said the commentary from the CEO "lead us to believe that NOW is likely to lower expectations when they report in 2 weeks."
"We do not see this as a NOW only issue and expect these slowing close rates are likely to be felt across the group and, when coupled with the ongoing US Dollar strength, we expect to see downward estimate revisions across the sector in coming weeks," they added. "Our gut tells us there is likely some modest short-term downside to the stocks, but investor attention is likely to quickly shift back to the Fed's actions/comments as the primary driver of stock performance post earnings season."
Elsewhere, BMO Capital Markets said in a note that the comments on the dollar strength are "an apparent and obvious challenge" for software companies. However, they added that McDermott "also mentioned some elongation of sales cycles in Europe," and BMO would like to understand the context of this more.