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On Thursday, KeyBanc Capital Markets maintained its Sector Weight rating on ServiceNow shares (NYSE:NOW), which currently trades near its 52-week high at $1,143.63. According to InvestingPro analysis, the stock appears overvalued compared to its Fair Value, despite showing impressive gross margins of 79.18% and robust revenue growth of 22.44% in the last twelve months. The firm’s analysts highlighted that ServiceNow’s current remaining performance obligation (cRPO) and subscription revenue results showed marginal outperformance or underperformance, even after currency adjustments for the quarter. Additionally, ServiceNow’s 2025 subscription revenue forecast was disappointing, falling short of expectations once more when accounting for currency headwinds.
The analysts noted that ServiceNow’s recent performance failed to meet the high standards usually seen in the company’s quarterly results. They emphasized that while valuation plays a significant role, the premium that ServiceNow commands over its peers necessitates a flawless performance. InvestingPro data reveals the stock’s premium valuation with a P/E ratio of 175.96x and high EBITDA multiple, though the company maintains a strong financial health score of 3.21 (GREAT). Discover 15+ additional exclusive insights and detailed valuation metrics with InvestingPro’s comprehensive research reports, available for 1,400+ top US stocks. The analysts expressed concern that the valuation could affect their willingness to overlook the company’s recent inconsistencies.
ServiceNow’s results and outlook have been a topic of discussion among investors, especially in light of KeyBanc’s recent rating downgrade. The downgrade was not solely based on valuation concerns, but it was mentioned as a crucial factor. The analysts suggested that while it is possible to look past certain irregularities, the company’s high valuation raises questions about the justification for such leniency.
The commentary from KeyBanc comes after a thorough assessment of ServiceNow’s financial outcomes and future projections. The analysts have indicated that the company’s premium valuation demands a higher level of performance, which has not been evident in the recent quarter.
Investors and market watchers will continue to monitor ServiceNow’s performance closely, particularly in relation to its valuation and how it compares to industry peers. KeyBanc’s Sector Weight rating indicates a neutral stance, suggesting that the stock is expected to perform in line with the analysts’ expectations for the overall sector in the near term. For deeper insights into ServiceNow’s valuation metrics, peer comparison tools, and expert analysis, access the full InvestingPro Research Report, which transforms complex Wall Street data into actionable intelligence.
In other recent news, ServiceNow has seen several significant developments. Earnings and revenue results showed a 21% year-over-year increase in both subscription and total revenues for the fourth quarter of 2024, amounting to $2,866 million and $2,957 million respectively. Analysts from firms such as Canaccord Genuity, Needham, Bernstein SocGen Group, and JMP Securities have adjusted their outlooks on the company’s stock, with price targets ranging from $1,021 to $1,300.
ServiceNow has also been actively expanding its artificial intelligence (AI) and Agentic initiatives, with the recent introduction of AI Agent Orchestrator and a strategic partnership with Visa (NYSE:V) to modernize their Dispute Management Service using ServiceNow’s AI technology. The company’s shift to a consumption-based monetization model set to launch in 2025 was also noted by Needham analysts.
These recent developments reflect the ongoing growth and strategic evolution of ServiceNow. The company’s robust financial performance, innovative AI advancements, and strategic partnerships underscore its strong position in the market.
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