Two 59%+ winners, four above 25% in Aug – How this AI model keeps picking winners
Investing.com - BofA Securities has raised its price target on ServiceNow (NYSE:NOW) to $1,100 from $1,085 while maintaining a Buy rating on the stock. The company, currently trading at $958, has demonstrated impressive performance with a market capitalization of nearly $199 billion and robust revenue growth of 21% over the last twelve months.
The firm cited ServiceNow’s leadership position in the $65 billion IT and custom applications industry, where it offers the leading enterprise cloud platform for workflow automation. According to InvestingPro data, the company maintains exceptional gross profit margins of 79% and generates strong free cash flows, supporting its market leadership.
BofA Securities views ServiceNow as a key winner in artificial intelligence, noting that the Now Assist agentic AI cycle is still in early stages, and expects the company’s $1 billion FY26 AI revenue target to increase as FY25 progresses.
The price target increase reflects BofA’s application of a 45x CY26 estimated free cash flow multiple, up from 44x previously, based on what it described as "healthy channel commentary."
Despite trading at a premium valuation of 38x free cash flow, or 1.8x adjusted for 22% free cash flow growth compared to the large cap group’s 31x or 1.7x, BofA believes the premium is justified given ServiceNow’s market position and growth prospects.
In other recent news, ServiceNow’s $2.85 billion acquisition of Moveworks is under an antitrust review by the U.S. Justice Department, which could delay the deal’s completion. Meanwhile, ServiceNow’s credit rating was upgraded to A2 by Moody’s, reflecting a strong growth outlook with expected revenue increases of approximately 20% to $13 billion in 2025. Ahead of the company’s second-quarter results, Goldman Sachs reiterated a Buy rating, projecting 19.5% growth in subscription revenue and constant currency remaining performance obligations. Cantor Fitzgerald raised its price target for ServiceNow to $1,200, citing accelerating business trends and de-risked management assumptions. Additionally, ServiceNow has formed a partnership with Ferrari (BIT:RACE) to enhance the automaker’s Hypercar team operations, utilizing ServiceNow’s AI platform for improved performance and operations. The collaboration supports Ferrari’s global operations through a centralized digital hub. These developments highlight ServiceNow’s strategic initiatives and financial health, which are crucial for investors to consider.
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