2 Tech Stocks That Could Help Set You Up for Life

Shares of ServiceNow and Workiva plunged about 30% YTD through April 1, but fundamentals remain strong: ServiceNow Q4 sales rose 21% to $3.6B with ~40% YoY growth in net new ACV >$1M and Now Assist AI net new ACV doubling YoY. Workiva posted Q4 revenue up 20% to $238.9M and delivered Q4 net income of $11.8M versus a prior-year $8.8M loss, and guided Q1 revenue of $244–$246M versus $206M a year ago. Forward P/E multiples are near 12-month lows, implying attractive valuations if AI-driven sector sentiment normalizes.

Analysis

The AI-driven derating has been indiscriminate; that creates an asymmetry where differentiated, high-switching-cost enterprise software can be bought with convex optionality. ServiceNow’s platform acts as an orchestration layer across back-office processes — that gives it embedment leverage into IT budgets (governance, change management, SSO, observability) that is harder to unbundle than point AI features. Workiva’s product sits inside compliance workflows where auditability, traceability, and regulatory record-keeping create protocol-like network effects; these tend to convert transient demand into sticky annuity revenue and raise the marginal cost for rivals attempting fast replication.

Second-order winners include GRC and ERP vendors who can bundle compliance modules (potential acquirers/partners for Workiva) and systems integrators that monetize ServiceNow rollouts. Conversely, cloud hyperscalers and low-cost AI vendors benefit if customers prioritize feature velocity over governance, creating a bifurcation: spend on mission-critical workflow and control planes remains resilient, while discretionary analytics and point-solution spend is the first to be cut. Flow mechanics matter: quant/momentum unwinds and ETF rebalancing have likely exaggerated near-term price moves, meaning sharp rebounds are plausible on a few positive data points.

Key risks are not binary and operate on different horizons: in 0–3 months, macro-driven IT budget cuts or a renewed risk-off can compress multiples further; in 6–24 months, platform-bundling by a hyperscaler (Microsoft) or rapid feature parity from LLM providers could structurally compress pricing power. Watch leading-indicator datapoints—large enterprise renewal terms, ACV composition by customer cohort, and any partnership announcements that alter bundling economics—as these will move valuation re-rating windows. Tactical positioning should therefore target idiosyncratic catalysts while using cheap hedges to protect against macro-induced drawdowns.

Key Decisions for Investors

• Long NOW (6–12 months): buy shares or a 6–12 month call spread to capture re-rating into platform multiples. Target +30–40% to a normalized multiple; size to 2–4% NAV and use a 20% trailing stop or buy a 3–6 month 10–15% OTM put as downside protection to cap loss to ~10–12%.
• Long WK (12–18 months): preferential pick for regulatory moat — buy WK shares or Jan-2028 LEAPs sized 1–2% NAV (equity exposure) to benefit from margin expansion and continued enterprise penetration. Target +40–60% if enterprise adoption and profitability trajectory continue; cap downside by selling 2–3 month covered calls or buying a 25% OTM put.
• Relative-value pair (3–9 months): long WK / short a high-multiple, AI-hypersensitivity SaaS basket (e.g., IGV or a concentrate of AI-adjacent small-cap SaaS). This isolates regulatory/annuity moat vs. broad AI-growth re-rating. Target asymmetric payoff where WK outperforms by 20–30%; keep gross exposure low (1–2% NAV each leg) and monitor correlation breakdowns.
• Income/entry strategy (0–6 months): write cash-secured puts on NOW at a strike ~15% below current levels for premium collection and willingness to own at a discounted basis. Use proceeds to finance partial protection (buy 3–6 month OTM puts) so net-put strategy limits downside to ~15–18% while collecting 3–6% premium if assigned.