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On Thursday, Goldman Sachs analyst Kash Rangan adjusted the price target for ServiceNow (NYSE:NOW) shares, reducing it from $1,200.00 to $1,050.00, yet reaffirming a Buy rating on the stock. Currently trading at $825.95, the company maintains a "GREAT" overall financial health score according to InvestingPro analysis. The adjustment comes ahead of ServiceNow's first-quarter earnings report for fiscal year 2025, which is scheduled for April 23, 2025.
ServiceNow has experienced a notable decline in its year-to-date performance, falling by 22%, compared to the average 14% drop within Goldman Sachs' coverage group. Despite this decline, the company maintains impressive gross profit margins of 79.18% and has demonstrated strong revenue growth of 22.44% over the last twelve months. This decrease is attributed to market concerns over the company's guidance for fiscal year 2025, which suggests growth rates below 20%. Additionally, potential cuts in public sector IT spending and uncertainties due to tariff policy volatility have also contributed to investor caution.
Despite these challenges, Rangan anticipates that ServiceNow will be able to achieve a 20.2% growth in constant currency (CC) subscription revenue for the first quarter, slightly surpassing its own forecast of 19.5% to 20%. The company's constant currency committed remaining performance obligations (cRPO) growth is also expected to align with its guidance of 20.5%.
While the first quarter guidance likely took into account the ongoing dynamics in the public sector and was set before any announcements related to tariffs, Rangan acknowledges the possibility of some risks to the second quarter and full fiscal year 2025 guidance. ServiceNow might modestly lower its growth expectations in response to the volatility in demand, primarily driven by tariffs and, to a lesser extent, public sector factors. The recent 90-day tariff pause adds complexity to these projections.
However, Rangan points out that with ServiceNow's shares currently trading 29% below their all-time highs and at a multiple of 33 times enterprise value to free cash flow (EV/FCF) for the calendar year 2026, the stock presents an attractive entry point for investors. InvestingPro analysis reveals the company's strong financial position with 13 key investment tips and comprehensive valuation metrics. Get access to the full ServiceNow Pro Research Report, along with detailed analysis of 1,400+ other US stocks, through an InvestingPro subscription. This perspective is bolstered by ServiceNow's reputation for emphasizing customer value, its growing artificial intelligence (AI) portfolio—which has surpassed $200 million in annual contract value (ACV)—and the strategic acquisition of Moveworks.
In addition to these growth drivers, ServiceNow is recognized for its strong and expanding free cash flow margin (FCFM), which exceeds 30%, and maintains a robust balance sheet with a moderate debt-to-equity ratio of 0.24. The company's strong financial position is further evidenced by its impressive Altman Z-Score of 10.66, indicating very low bankruptcy risk. These qualities underscore the company's position as a defensive software asset that offers potential for high growth at scale.
In other recent news, ServiceNow Inc reported a significant 94% year-over-year increase in Q4 2024 revenue, reaching $10.9 million, alongside a 420% rise in EBITDA, reflecting strong operational performance. Additionally, the company announced its intent to acquire Logik.ai, aiming to enhance its Customer Relationship Management capabilities, particularly in Sales and Order Management. This acquisition is expected to streamline sales processes, leveraging Logik.ai's AI-powered Configure, Price, Quote technology. In terms of stock analysis, Raymond (NSE:RYMD) James and BMO Capital Markets both adjusted their price targets for ServiceNow, with Raymond James lowering it to $1,000 and BMO Capital Markets to $990, while both firms maintained an Outperform rating. These adjustments reflect considerations of economic factors such as a weaker U.S. Federal Reserve and potential global GDP growth threats due to new tariffs. Despite these concerns, analysts from both firms maintain a positive outlook on ServiceNow's stock. Furthermore, the company is preparing for its 2025 Knowledge user conference, which is expected to focus on AI and agentic adoption, potentially driving significant discussions.
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