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On Monday, ServiceNow (NYSE:NOW) stock experienced a decline, falling 6% compared to the NASDAQ’s 3% drop, extending its year-to-date decline to nearly 20%. The decrease in share price occurred as the market reacted to the company’s announcement of its intent to acquire Moveworks, an AI assistant firm, for a total consideration of $2.85 billion, a combination of cash and stock. This move comes amid ServiceNow’s recent guidance, which projected subscription revenue growth of less than 20%. According to InvestingPro data, the company maintains impressive gross profit margins of 79% and currently trades slightly above its Fair Value.
Analysts at Goldman Sachs, including Kash Rangan, have reiterated their Buy rating and $1,200.00 price target for ServiceNow (NYSE: NOW), despite the market’s immediate response. With a market capitalization of $160.5 billion and a strong analyst consensus recommendation of 1.57, ServiceNow remains a prominent player in the software industry. Rangan believes that the acquisition holds strategic value, potentially enhancing ServiceNow’s existing Now Assist offerings. The deal is expected to integrate front-end automation capabilities for various departments such as Sales, CRM, Finance, and HR, which could strengthen ServiceNow’s position in the CRM market.
ServiceNow’s decision to proceed with the acquisition aligns with the company’s broader AI strategy. While some investors may question the necessity of the acquisition, Goldman Sachs views it as a balance between fostering in-house innovation and making significant external investments. The dynamic nature of the AI market necessitates such strategic moves for companies to remain competitive.
If the acquisition of Moveworks proves successful, it could bolster ServiceNow’s long-term goal of maintaining a 20% growth rate. This growth would be further supported by an increase in AI revenue contributions. Goldman Sachs’ confidence in the acquisition reflects a belief in its potential to create synergies with ServiceNow’s existing services and drive future growth.
ServiceNow’s initiative to expand its AI capabilities through this acquisition demonstrates the company’s commitment to evolving its product offerings and maintaining a competitive edge in the market. With revenue growth of 22.4% and an overall financial health score rated as GOOD by InvestingPro, the company appears well-positioned for future growth. The firm’s strategy to integrate Moveworks’ technology could pave the way for more advanced and efficient solutions for its customers, particularly in the realms of automation and customer relationship management. For deeper insights into ServiceNow’s valuation, growth prospects, and 15+ additional ProTips, explore the comprehensive Pro Research Report available on InvestingPro.
In other recent news, ServiceNow has announced its acquisition of AI firm Moveworks for $2.85 billion, a strategic move aimed at enhancing its AI capabilities. The acquisition is set to close in the second half of 2025, and it is expected to integrate Moveworks’ AI assistant and enterprise search technology with ServiceNow’s existing offerings. Despite the significant investment, ServiceNow reported surpassing $200 million in Pro Plus Annual Contract Value during the fourth quarter, exceeding estimates by over 10%. Analysts from Mizuho (NYSE:MFG) have adjusted their price target for ServiceNow to $1,100, maintaining an Outperform rating, while Evercore ISI and Canaccord Genuity have reiterated their Outperform and Buy ratings with price targets of $1,150 and $1,275, respectively. Evercore ISI projects a $300 million increase in Annual Recurring Revenue by the end of 2025, which could lead to an incremental $350 million in revenue for 2026. Meanwhile, Bernstein has maintained an Outperform rating with a price target of $1,021, highlighting ServiceNow’s solid position in the software sector. The acquisition is anticipated to have minimal impact on ServiceNow’s 2025 revenue, but it is expected to expand the company’s Total (EPA:TTEF) Addressable Market and strengthen its presence in the enterprise AI space. As the deal progresses, investors will be closely monitoring its impact on ServiceNow’s financial performance and market positioning.
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