Quick Look At Reports From ServiceNow, Chipotle, and Harmony

We are knee deep into Q3 earnings season, and the reports from our portfolio and Watch List stocks are rolling in. Let's take a brief look at 2 portfolio names and one watch list stock.

ServiceNow (NOW)

ServiceNow is a steady, reliable SaaS firm that continues to prove out its value and growth potential to investors. Subscription revenues were up 27% year-over-year (24.5% after currency). It booked 83 transactions over $1 million, up 20%. The quarter ended with 49 customers at over $20 million in annual contract value, up 58%. All of these are excellent metrics, beating guidance and continuing to focus the business towards large, sticky, and expandable clients.

Future metrics look good as well. Backlog grew 27%. The company launched its "Vancouver Platform", which rolls out a whole set of generative AI features, properly fulfilling Wall Street's appetite for hot buzzwords - but also helping maintain ServiceNow's competitive technology edge. The firm also continues to be shareholder friendly, buying back 500,000 shares with $1.2 billion left on its repurchase program.

ServiceNow continues to show itself as a great company but the stock price has caught up. I'm holding the fair value price at $572.

Chipotle (CMG)

Chipotle continues to chug along with another good report. Sales were up 11.3% to $2.5 billion. Comp store sales increased 5.0%, a respectable figure driven by higher traffic. Food and labor inflation eased allowing operating margin to climb almost a full percentage point to 16%. 62 net new store locations opened in the quarter, right about on our expectation of 200-250 new openings a year. An additional $300 million was added to the firm's share repurchase authorization.

Not a whole lot else to say, Chipotle delivered a good, on-model quarter. I'm holding the fair value at $1,424.

Harmony Biosciences (HRMY)

You could really say that ServiceNow and Chipotle's quarters were kinda boring, but in a good way (boring can be hugely successful in investing).

You could NOT say that about Harmony's last several weeks!

A lot going on here since we added it to the buy list in late September. Shortly after, the firm reported Phase III results on pitolisant for Idiopathic Hypersomnia (IH), missing its primary endpoint and sending the stock tumbling 30%. No shocker there, this is a one-product company and not being able to indicate for IH would materially limit the potential market for that product.

Then, the firm reported extremely strong Q3 results that saw revenues increase 37% and WAKIX patients grow over 6% sequentially. Harmony also completed its acquisition of Zynerba (which we covered in the initial review), repurchased 1.4 million shares, and announced a big $200 million repurchase plan that would potentially reduce share count by 15%. That sent the stock rebounding over 20%!

So where are we at with Harmony? Well, at this point the thesis really hasn't changed. Management still intends to pursue the IH indication, planning to meet with the FDA to review the full set of trial data. A pediatric narcolepsy indication will be filed in Q4. A Phase III study for Prader-Willi will commence early next year. And Zygel Phase III results for Fragile X should come out next year as well.

So, despite all the volatility, I'm holding firm on the $56 price target. We always knew this was gonna be a risky and volatile one, and investors should keep their positions small. But the current stock price of about $24 looks pretty darn attractive.