ServiceNow Gains Bullish Outlook with $1,200 Price Target Amid Promising Growth Potential

ServiceNow (NYSE:NOW) stock plunged over 12% intra-day today despite the IT management software firm delivering better-than-expected fourth-quarter earnings and revenue. The sharp decline came as investors reacted to weaker-than-anticipated guidance for subscription revenue in the coming quarters.

The company reported adjusted earnings per share of $3.67 for the fourth quarter, slightly surpassing analysts’ expectations of $3.65. Revenue for the period reached $2.96 billion, in line with consensus forecasts. However, the earnings beat was marginal, marking the narrowest constant currency outperformance since the pandemic at just 0.4% above company guidance.

ServiceNow’s subscription business remained a key growth driver, with revenue from subscriptions climbing 21% year-over-year to $2.87 billion. The company also saw strong momentum in its AI-driven automation tools, which help customers streamline operations.

However, concerns mounted over its outlook. Remaining performance obligations—a crucial measure of future revenue commitments—stood at $10.27 billion at the end of the quarter, reflecting a 19% annual increase. Yet, ServiceNow’s first-quarter subscription revenue guidance of $2.995 billion to $3.00 billion fell short of the $3.04 billion analysts had projected.

For full-year 2025, the company forecasts subscription revenue between $12.64 billion and $12.68 billion, missing the Wall Street consensus of $12.83 billion. The weaker-than-expected projections overshadowed its strong Q4 performance, prompting investors to reassess the stock’s near-term growth potential.

RBC Capital analysts raised their price target for ServiceNow (NYSE:NOW) to $1,210 from $1,045, reaffirming an Outperform rating on the stock. The increase reflects confidence in the company’s ability to sustain long-term growth, driven by its expanding role in enterprise operations and the ongoing integration of generative AI technologies.

ServiceNow is positioned as a gold-standard investment for the next 5-10 years, with profitable, primarily organic growth expected to continue. The company is evolving beyond its IT origins, offering a platform that enables enterprises to build custom SaaS applications for HR, finance, legal, facilities, and procurement. This broadening scope positions ServiceNow as a key player in the enterprise software market.

The $1,210 price target is based on a 19x EV/revenue multiple for 2025, representing a slight premium to peers due to ServiceNow’s superior growth and margin profile. On a free cash flow basis, this translates to a 60.5x EV/2025 FCF multiple.

With generative AI in its early stages, ServiceNow is well-positioned to capitalize on this transformative technology over the next decade, supporting its trajectory as a foundational platform for enterprise innovation.

Shares of ServiceNow (NYSE:NOW) shares rose more than 5% intra-day today following the company's announcement of a fourth-quarter subscription revenue forecast that surpassed Wall Street expectations. The IT management software provider also raised its full-year subscription revenue outlook, driven by continued demand from both new and existing customers.

For the fourth quarter, ServiceNow projected subscription revenue between $2.875 billion and $2.880 billion, exceeding the Street consensus of $2.85 billion. Additionally, the company increased its annual subscription revenue forecast to a range of $10.655 billion to $10.660 billion, up from its previous guidance of $10.575 billion to $10.585 billion.

In the third quarter, ServiceNow reported adjusted earnings per share of $3.72 on revenue of $2.79 billion, beating expectations of $3.45 per share and $2.75 billion in revenue. The company also saw a 16% increase in current remaining performance obligations, reaching $9.36 billion.

• Wells Fargo maintains a "Buy" rating for ServiceNow, indicating a positive outlook on the company's future performance.
• The stock price of $938.65 reflects a 1.81% increase, showcasing investor confidence and strong market performance.
• ServiceNow's resilience is highlighted by its stock price nearing the 52-week high, with a market capitalization of approximately $193.36 billion, indicating its significant impact in the tech industry.

ServiceNow (NYSE:NOW) is a leading provider of cloud-based solutions that help companies manage digital workflows. The company offers a range of services, including IT service management, operations management, and business management. ServiceNow competes with other tech giants like Salesforce and Microsoft in the enterprise software market.

On October 9, 2024, Wells Fargo maintained its "Buy" rating for ServiceNow, with the stock priced at $938.65. This rating suggests confidence in the company's future performance. The stock's price reflects a 1.81% increase from the previous session, indicating strong investor interest and performance that surpasses the general market trend.

ServiceNow's stock price of $938.65 represents a $16.65 increase, showcasing its resilience and growth potential. The stock traded between $915.96 and $943.30 during the day, demonstrating some volatility. However, it remains close to its 52-week high of $945.46, highlighting its upward trajectory.

With a market capitalization of approximately $193.36 billion, ServiceNow is a significant player in the tech industry. The trading volume for the day was 843,290 shares, reflecting active investor engagement. This level of activity suggests that investors are optimistic about the company's prospects.

ServiceNow's stock performance is noteworthy, especially considering its 52-week range of $527.24 to $945.46. The company's ability to maintain a high stock price indicates strong market confidence. As highlighted by Wells Fargo's "Buy" rating, ServiceNow is well-positioned for continued growth in the competitive tech landscape.

ServiceNow (NYSE:NOW) experienced a notable increase of more than 6% in its share price pre-market today following the announcement of higher annual subscription guidance and impressive fiscal Q2 results. The software company also revealed that COO CJ Desai had left, with Chris Bedi stepping in as interim Chief Product Officer.

ServiceNow reported adjusted earnings of $3.13 per share on revenue of $2.63 billion, surpassing Wall Street estimates of $2.82 per share on revenue of $2.60 billion.

Subscription revenues for Q2 grew by 23% to $2.54 billion compared to the same period last year, driven by new business acquisitions. The company recorded 88 transactions exceeding $1 million in net new annual contract value (ACV) in Q2, a 26% increase year-over-year, significantly boosting its backlog.

ServiceNow's remaining performance obligations (RPO) reached $18.6 billion as of Q2, marking a 31% growth year-over-year. Looking forward, the company raised its subscription revenue guidance to a range of $2.66 billion to $2.67 billion, up from the previous range of $2.525 billion to $2.530 billion.

Citi analysts increased their price target on ServiceNow (NYSE:NOW) to $911 from $909 while maintaining a Buy rating on the stock. The analysts believe that ServiceNow is well-positioned to outperform in a sluggish software demand environment due to its expanding automation platform, which is set to gain significant market share through consolidation and the rollout of AI/GenAI use cases across IT and back/mid-office operations.

Despite concerns about macroeconomic softness in Europe, the analysts noted that these are offset by strong performance in North America and the Middle East, as well as significant large deal momentum, including one of the largest deals in the company's history. They anticipate that ServiceNow will continue to deliver healthy financial results, driven by large deal activity, increasing Pro-Plus contributions, and heightened federal activity.

The analysts expect stronger positive revisions compared to Q1, with built-in conservatism and a potential acceleration in the cRPO metric in the second half of the year providing additional catalysts.