Piper Sandler cuts ServiceNow price target to $1,120, stays positive

On Thursday, Piper Sandler analyst Rob Owens adjusted the price target for ServiceNow (NYSE:NOW) stock, reducing it to $1,120 from $1,200, while maintaining an Overweight rating. The adjustment follows ServiceNow’s first-quarter results, which Owens described as a "Better-than-Feared Result," noting the quarter showcased the largest new annual contract value in the company’s history for a first quarter. With a market capitalization of $168.23 billion and impressive gross profit margins of 79.18%, ServiceNow maintains its position as a prominent player in the software industry.

ServiceNow exceeded expectations across all top- and bottom-line metrics, with management emphasizing the company’s momentum with AI modules, RaptorDB, and CRM/Industry solutions. The company’s strong performance is reflected in its 22.44% revenue growth over the last twelve months, reaching $10.98 billion. The first-quarter success was partially incorporated into the full-year guidance, with a slight increase to the midpoint of subscription revenue projections, despite foreign exchange rates providing an increasing benefit to the numbers. InvestingPro analysis reveals 12+ additional exclusive insights about ServiceNow’s financial health and growth prospects.

The company’s shares experienced a surge, climbing more than 10% in after-market trading. Owens highlighted ServiceNow’s impressive large deal momentum and the successful adoption of AI and CRM technologies. He also noted that while the price target was rationalized to $1,120, the stance on the stock remains Overweight due to these positive developments. According to InvestingPro’s Fair Value assessment, the stock appears slightly overvalued at current levels, though the company maintains a "GOOD" overall financial health rating.

ServiceNow’s first-quarter results also indicated solid performance, continued traction in AI, and stable trends in the US public sector. The management team at ServiceNow has adopted a cautious approach to their guidance, adjusting the constant currency growth to the lower end for the year, accounting for multiple scenarios.

In summary, Owens expressed satisfaction with ServiceNow’s ongoing strong execution and achievements within AI segments, which supported the decision to maintain an Overweight rating despite the modest reduction in the price target to $1,120.

In other recent news, ServiceNow’s recent quarterly earnings report exceeded expectations, with a notable 22% year-over-year growth in calculated remaining performance obligations (cRPO), surpassing guidance by 150 basis points. This strong performance has led several analysts to adjust their price targets for the company. Mizuho (NYSE:MFG) Securities raised its price target to $1,025, maintaining an Outperform rating, while Canaccord Genuity increased its target to $1,075, also keeping a Buy rating. Evercore ISI adjusted its target to $1,000, citing strong demand signals and maintaining an Outperform rating. Stifel analysts lifted their target to $975, recognizing ServiceNow’s robust quarterly results and operational discipline. Meanwhile, Guggenheim raised its price target to $724 but maintained a Sell rating, noting potential risks and challenges despite the company’s positive performance. ServiceNow’s strategic focus on generative AI and its Federal business contributed to its strong results and positive outlook from most analysts. Despite some macroeconomic uncertainties, the company is projected to maintain significant growth in the coming quarters.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.