ServiceNow stock holds $1,150 target at Evercore ISI

On Monday, Evercore ISI maintained a positive stance on ServiceNow (NYSE:NOW) shares, reiterating an Outperform rating and a price target of $1,150.00. The firm’s analysts focused on the company’s growth trajectory and the recent acquisition’s potential impact on future financials. Currently trading at $783.82, InvestingPro analysis suggests the stock is slightly undervalued, with impressive gross profit margins of 79.2% and a robust market capitalization of $160.5 billion.

ServiceNow, a provider of cloud-based platforms and solutions to manage digital workflows, has been on a rapid growth path, prompting Evercore ISI to project an approximate $300 million increase in Annual Recurring Revenue (ARR) by the end of the calendar year 2025 (CY25). This projection could lead to an incremental $350 million in revenue for the calendar year 2026 (CY26), offering about a 2% upside to current Street estimates. The company has demonstrated strong execution with a 22.4% revenue growth in the last twelve months and a impressive five-year revenue CAGR of 26%. InvestingPro subscribers can access 15+ additional insights about ServiceNow’s growth metrics and financial health.

The acquisition in question, expected to close in the second half of 2025 (2H25), is anticipated to have a minimal impact on ServiceNow’s revenue for CY25. Investor relations has confirmed that the deal will not alter the company’s profitability targets for the fiscal year 2025 (FY25). However, Evercore ISI has included a conservative assumption of a 25% negative impact on Moveworks’ Free Cash Flow (FCF) margin in their CY26 estimates, which could present a 1-2% headwind to the current CY26 FCF targets.

Despite these conservative assumptions, Evercore ISI views the acquisition as a strategic move that expands ServiceNow’s Total (EPA:TTEF) Addressable Market (TAM) and provides a faster route to establishing a more substantial presence in the enterprise sector. The deal also offers clarity on ServiceNow’s near-term merger and acquisition (M&A) strategy, which has been a point of concern for some investors.

Evercore ISI’s analysis includes a detailed ’rough math’ on the potential financial impact of the acquisition for CY26 and its influence on valuation. The firm also offers a ’Choose Your Own Adventure’ (CYOA) model to clients upon request, allowing them to explore various scenarios and their potential outcomes.

In other recent news, ServiceNow has announced its plans to acquire AI company Moveworks for $2.85 billion, a transaction expected to close in the second half of 2025. This acquisition, which will be paid in cash and stock, aims to integrate Moveworks’ AI assistant and enterprise search technology with ServiceNow’s existing capabilities, enhancing employee engagement and productivity. ServiceNow has been experiencing strong growth, with nearly 1,000 AI customers and over $200 million in annual contract value for its Pro Plus AI solution as of December 31, 2024. Despite this growth, Erste Group downgraded ServiceNow’s stock rating from Buy to Hold, citing concerns over its high valuation. Meanwhile, Canaccord Genuity maintained its Buy rating with a price target of $1,275, while Bernstein reiterated an Outperform rating with a $1,021 price target, highlighting ServiceNow’s status as a quality compounder. The acquisition is expected to bolster ServiceNow’s offerings across various workflows, including CRM, finance, and HR, by simplifying employee interactions with enterprise systems. ServiceNow’s executive, Amit Zavery, expressed optimism about the acquisition’s potential to enhance enterprise-wide AI adoption. Investors will be closely watching the impact of these developments on ServiceNow’s financial performance and market position.

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