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On Tuesday, Oppenheimer analyst Brian Schwartz reduced ServiceNow’s (NYSE:NOW) price target to $970 from the previous $1,200 while maintaining an Outperform rating on the stock. With the stock currently trading at $799.82 and analyst targets ranging from $716 to $1,426, InvestingPro data shows the company maintains impressive gross profit margins of 79.2%. Schwartz highlighted that ServiceNow’s first-quarter results seemed robust and the company exhibited strong cost discipline, which might lead to surpassing the consensus estimates for the first quarter, with earnings scheduled for April 23.
Schwartz noted the potential impact of escalating macro and geopolitical uncertainties that could decelerate enterprise IT purchasing behavior, which may negatively affect ServiceNow’s guidance. Despite these challenges, he anticipates that the upcoming earnings update will confirm the company’s strong adoption of generative AI, solid margins, and position as a company with sound fundamentals. This assessment aligns with InvestingPro’s analysis, which rates ServiceNow’s overall financial health as GOOD, supported by strong revenue growth of 22.4% over the last twelve months.
The analyst pointed out that although ServiceNow’s exposure to the Federal sector could weigh on the stock, the company’s offerings are considered essential and deeply integrated within its enterprise customers’ IT infrastructure. This integration makes ServiceNow more resilient compared to other software companies during uncertain times.
Schwartz concluded that while the Federal business exposure is seen as a persistent concern for ServiceNow, the company’s business is expected to remain robust. The decision to lower the price target to $970 is attributed to a compression in group multiples, yet the Outperform rating is reiterated based on the company’s solid fundamentals and critical role in its clients’ operations. For deeper insights into ServiceNow’s valuation and performance metrics, including 15+ additional ProTips and comprehensive financial analysis, check out the detailed Pro Research Report available on InvestingPro.
In other recent news, ServiceNow has reported its Q4 2024 earnings, showcasing a significant 94% year-over-year increase in quarterly revenue, reaching $10.9 million, alongside a 420% increase in EBITDA. Despite these strong financial results, analysts from Goldman Sachs, Raymond (NSE:RYMD) James, and BMO Capital have adjusted their price targets for ServiceNow, citing various market concerns. Goldman Sachs reduced its target from $1,200 to $1,050, while Raymond James and BMO Capital set their targets at $1,000 and $990, respectively, maintaining positive outlooks on the stock. The adjustments come amid concerns about fiscal year 2025 guidance and potential impacts from tariffs and public sector spending. Additionally, ServiceNow announced its intent to acquire Logik.ai to enhance its CRM capabilities, aiming to streamline sales processes and boost efficiency. This acquisition is expected to complement ServiceNow’s growing AI portfolio and strengthen its position in the market. The company is also preparing for its 2025 Knowledge user conference, which will focus on AI and agentic adoption, potentially driving further discussions and developments.
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