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On Wednesday, Stifel analysts adjusted the price target for ServiceNow (NYSE:NOW) shares, reducing it to $950 from the previous target of $1,175. Despite this change, the firm maintained a Buy rating on the stock. According to InvestingPro data, the stock currently trades at $811.56, with analyst targets ranging from $716 to $1,426, reflecting mixed market sentiment. The company’s impressive gross profit margin of 79.2% underscores its operational efficiency.
Stifel’s analysis was based on conversations with several System Integrator (SI) contacts, which revealed a consistent level of enterprise deal activity. Additionally, data pertaining to the U.S. Federal market appeared strong. These factors are anticipated to contribute to a modest beat in calculated Remaining Performance Obligations (cRPO) growth, potentially reaching at least 21% year-over-year growth on a constant currency basis. This would exceed the company’s own guidance of 20.5%. InvestingPro data shows ServiceNow maintaining strong momentum with 22.4% revenue growth in the last twelve months, supporting these growth projections.
However, the research revealed certain areas of concern, particularly in the mid-market segment where customers seem to be more affected by the current economic uncertainties. Despite solid enterprise deal pipelines indicated by partner commentary, the potential impact of near-term risks such as DOGE/Tariff on consumer purchasing decisions has led to a more cautious outlook for the remainder of the year.
In light of these considerations, Stifel has revised downward its forecasts for ServiceNow’s cRPO and subscription revenue for fiscal years 2025 and 2026. Nevertheless, the firm’s long-term view remains positive, with the expectation that ServiceNow will continue to achieve approximately 20% growth in revenue and free cash flow, along with margin expansion in the upcoming years. The new price target reflects this balanced perspective between near-term challenges and sustained long-term performance.
In other recent news, ServiceNow has announced its largest acquisition to date, agreeing to purchase Moveworks for approximately $2.85 billion in cash and stock. This acquisition is expected to enhance ServiceNow’s artificial intelligence capabilities, particularly by integrating Moveworks’ advanced AI assistant and enterprise search technology. Moveworks had reported over $100 million in annual recurring revenue by September 2024 and is projected to reach approximately $150 million by the end of 2025. Analysts from firms like TD Cowen, Cantor Fitzgerald, and Stifel have maintained their Buy ratings on ServiceNow, with price targets ranging from $1,048 to $1,300. UBS has adjusted its price target for ServiceNow to $1,000, while RBC Capital Markets has set a target of $986, both maintaining positive ratings.
The acquisition is seen as a strategic fit, aligning well with ServiceNow’s existing capabilities and sales strategies. Moveworks’ client base includes more than 350 large enterprises, with a significant overlap with ServiceNow’s customers. Additionally, ServiceNow’s Pro Plus SKU has surpassed $200 million in annual contract value, highlighting the company’s growth in AI customer engagement. The integration of Moveworks is anticipated to expand ServiceNow’s market reach, particularly in the enterprise search domain, and bolster its position in the competitive Software (ETR:SOWGn) as a Service market.
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