Citi maintains Buy on ServiceNow stock with $1,432 target

The report concludes with a note of caution against drawing broad conclusions about the software sector from ServiceNow (NYSE:NOW)’s performance alone. ServiceNow’s unique positioning and monetization strategies in the Federal space and GenAI technology are not widely mirrored across the industry, although there are some exceptions, such as Microsoft (NASDAQ:MSFT), which InvestingPro rates with a "GREAT" financial health score. Microsoft currently trades at a P/E ratio of 36.5, reflecting the premium investors place on leading tech companies. Discover comprehensive insights and Fair Value assessments for over 1,400 stocks, including detailed analysis of the entire software sector, with an InvestingPro subscription.

ServiceNow’s fourth-quarter performance showed a modest beat, but the company’s forward guidance did not impress the market, which could negatively impact the stock. Despite this, Citi analysts remain optimistic, citing ServiceNow’s rapid growth in its NOW-Assist/AI products, which have seen a 150% quarter-over-quarter increase in Annual Recurring Revenue (ARR), reaching approximately $250 million.

The analysts view the company’s conservative guidance as a cautious approach in the face of uncertain macroeconomic conditions, including changes in administration and a shift in revenue recognition due to the introduction of ServiceNow’s new Agents model, which combines subscription and consumption elements.

ServiceNow’s stock had seen significant gains in 2024, rising by 35%, and an additional 20% since the previous earnings release. Citi sees any pullback in the stock price as an opportunity for investors, believing that the company’s financial projections for 2025 have been sufficiently de-risked. Furthermore, the analysts highlight ServiceNow’s strong AI and product development cycle as one of the most robust in the software industry.

The report concludes with a note of caution against drawing broad conclusions about the software sector from ServiceNow’s performance alone. ServiceNow’s unique positioning and monetization strategies in the Federal space and GenAI technology are not widely mirrored across the industry, although there are some exceptions, such as Microsoft, which InvestingPro rates with a "GREAT" financial health score. Microsoft currently trades at a P/E ratio of 36.5, reflecting the premium investors place on leading tech companies. Discover comprehensive insights and Fair Value assessments for over 1,400 stocks, including detailed analysis of the entire software sector, with an InvestingPro subscription.

In other recent news, Euroclear recently announced a seven-year strategic partnership with Microsoft, aimed at enhancing its business ecosystem and technology infrastructure. The collaboration is expected to drive innovation through digital and data-centric initiatives, leveraging Microsoft’s cloud technologies and generative AI to streamline Euroclear’s platform development and operations.

On the financial side, BMO Capital Markets cut its price target for Microsoft from $495 to $490 due to concerns over Azure’s performance. Despite this adjustment, BMO maintains an Outperform rating for Microsoft, reflecting confidence in the company’s long-term growth potential. Similarly, Cantor Fitzgerald reaffirmed its Overweight rating on Microsoft, maintaining a price target of $509.

In the AI sector, Microsoft’s Azure Container Apps serverless GPUs are set to deploy the recently released DeepSeek-R1 AI model. This development is expected to streamline AI application development and deployment, offering more efficiency for users. However, Chinese AI startup DeepSeek’s chatbot has faced challenges in delivering accurate news, according to a recent audit by NewsGuard.

Finally, OpenAI, in partnership with Microsoft, is gearing up for an exciting next phase, according to CEO Sam Altman. OpenAI recently launched ChatGPT Gov, a tool designed for U.S. government agencies, aiming to enhance efficiency in government operations. These are the most recent developments in the rapidly evolving technology industry.

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