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On Tuesday, BMO Capital Markets adjusted its outlook on ServiceNow shares (NYSE:NOW), with analyst Keith Bachman setting a new price target of $950, down from the previous $990, while maintaining an Outperform rating on the stock. The revision comes as the firm fine-tunes its estimates for ServiceNow ahead of the company’s earnings report on April 23. According to InvestingPro data, ServiceNow, a prominent player in the Software (ETR:SOWGn) industry, currently trades at $756, with analyst targets ranging from $716 to $1,426. The company has demonstrated impressive growth with revenue increasing 22.4% over the last twelve months to $11 billion.
Bachman stated that despite the positive view on ServiceNow and its long-term potential, current market conditions marked by macroeconomic uncertainty might not lead to a significant shift in investor sentiment towards the software and IT services sectors during this earnings season. This assessment persists even though valuations are perceived as relatively attractive. InvestingPro analysis reveals strong fundamentals, with the company maintaining robust gross profit margins of 79% and operating with a moderate debt level. The company’s Financial Health Score is rated as GOOD, supported by strong cash flows and consistent profitability.
The analyst remarked, "We are taking the opportunity to tweak our NOW estimates heading into earnings this week. We remain positive on NOW and longer-term prospects." Bachman’s comments suggest a cautious approach to the near-term market reaction while expressing confidence in ServiceNow’s ongoing performance.
Bachman further elaborated on the rationale behind the price target adjustment, saying, "However, if estimates remain largely in place for NOW, as well as the rest of our coverage universe, despite the uncertain macro, we do not think this earnings season will cause investors to move more aggressively back into software and IT services, despite what we consider to be relatively attractive valuations."
In conclusion, while BMO Capital has reduced its price target for ServiceNow to $950, the firm continues to endorse an Outperform rating. This indicates that, in their view, ServiceNow is expected to perform better than the broader market over a certain period, despite the trimmed price target and prevailing economic uncertainties. Based on InvestingPro’s comprehensive analysis, which includes over 30 key metrics and exclusive ProTips, ServiceNow appears slightly undervalued at current levels. Discover detailed valuation analysis and 12 additional ProTips by accessing the full Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, ServiceNow has faced several adjustments in analyst price targets and ratings. JPMorgan reduced its price target for ServiceNow from $1,200 to $970, maintaining an Overweight rating, while Oppenheimer also lowered its target to $970, citing robust first-quarter results and strong cost discipline. TD Cowen adjusted its price target to $1,100 from $1,300, keeping a Buy rating, and expressed optimism about ServiceNow’s artificial intelligence product cycle despite ongoing challenges. Cantor Fitzgerald reaffirmed its Overweight rating with a price target of $1,048, emphasizing the need for a strong first-quarter performance in 2025 to justify current valuations.
ServiceNow’s acquisition of Moveworks has been positively received, with analysts recognizing its potential to enhance AI-driven capabilities. However, analysts from various firms, including Cantor Fitzgerald and Oppenheimer, have noted concerns about the impact of macroeconomic conditions and federal sector uncertainties on ServiceNow’s outlook. Despite these challenges, ServiceNow is seen as maintaining solid fundamentals and resilience due to its critical role in enterprise IT infrastructure. The company’s adoption of generative AI and its broad platform capabilities are highlighted as growth drivers in the current environment.
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