Why Shares of ServiceNow Jumped 14% in November

What happened

Shares of ServiceNow (NYSE: NOW) climbed 14.5% in November, according to data provided by S&P Global Market Intelligence, as investors celebrated the stock’s move to a major index. The cloud computing company also benefited from acting quickly to firm up its leadership structure.

So what

ServiceNow, a provider of cloud-based services that automate workflow and business processes, was dealt a blow in October when CEO John Donahoe accepted an offer to take the top job at Nike. ServiceNow quickly named Bill McDermott, the former CEO of SAP, as Donahoe’s replacement but said Donahoe would remain until year’s end to ensure a smooth transition.

Image source: Getty Images.

McDermott formally assumed the role of CEO on Nov. 18, ahead of schedule, and brought Gina Mastantuono over from Ingram Micro to be chief financial officer.

The appointments helped lift a cloud of uncertainty surrounding ServiceNow, which was putting pressure on the shares. The stock got an additional boost days later when Standard & Poor’s said ServiceNow would replace Celgene in the S&P 500 following the latter’s acquisition by Bristol-Myers Squibb.

Membership in a large index like the S&P 500 typically gives a stock a lift because inclusion prompts mutual funds that track the index to buy shares.

Now what

Despite the volatility in the C-suite, ServiceNow is performing well, with shares up more than 50% year to date and up more than 260% over the past three years. The company has established itself as a reliable tech stock and still has room to grow as it expands its portfolio to offer legal and finance automation services.

The Donahoe news was a short-term blow to ServiceNow, but in November, the company showed it was quickly regaining its footing.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bristol-Myers Squibb and Nike. The Motley Fool owns shares of ServiceNow, Inc. The Motley Fool has a disclosure policy.

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