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Investing.com - Goldman Sachs has reiterated its Buy rating and $1,150.00 price target on ServiceNow (NYSE:NOW) ahead of the company’s second-quarter fiscal 2025 results scheduled for July 23. According to InvestingPro data, analyst consensus remains highly bullish with targets ranging from $724 to $1,300, while the company currently trades near $967 with a substantial market capitalization of $200.6 billion.
ServiceNow has underperformed Goldman Sachs’ broader coverage year-to-date, declining 8% compared to the coverage average gain of 2%, despite solid first-quarter results and forward indicators including current remaining performance obligations (cRPO) growth of 22% at constant currency. InvestingPro data reveals impressive fundamentals, including a robust 78.92% gross profit margin and 21% revenue growth over the last twelve months. Get access to 12 more exclusive ProTips and comprehensive analysis with InvestingPro.
Goldman Sachs expects ServiceNow to deliver 19.5% constant currency subscription revenue growth and 19.5% constant currency cRPO growth in the second quarter, both in line with guidance, while noting that investors remain concerned about sub-20% fiscal year 2025 guidance and potential impacts from Federal budget rationalizations. The company maintains strong financial health with an overall score of "GOOD" according to InvestingPro’s comprehensive analysis, which evaluates multiple factors including growth, profitability, and cash flow metrics.
The firm believes ServiceNow’s guidance and expectations are sufficiently de-risked, with potential for modest outperformance if purchasing normalizes, highlighting that the company has assumed flat Federal net new annual contract value from the second through fourth quarters despite 30% growth in the first quarter.
Following ServiceNow’s Knowledge 2025 event, Goldman Sachs expressed increased confidence in the company’s multiple growth vectors, particularly emerging workflows like CRM and AI monetization, supporting ServiceNow’s reiterated $15 billion-plus growth target, with potential to exceed its $1 billion AI annual contract value target versus $250 million currently.
In other recent news, ServiceNow’s earnings and revenue prospects have garnered significant attention. Moody’s Ratings upgraded ServiceNow’s long-term issuer rating to A2, citing a strong growth outlook and projecting revenues to reach approximately $13 billion by 2025. This reflects an expected growth rate of around 20% over the next few years. Meanwhile, Cantor Fitzgerald has raised its price target for ServiceNow to $1,200, emphasizing accelerating business trends and de-risked management assumptions in the Federal business segment. TD Cowen also increased its price target to $1,150, highlighting robust growth in ServiceNow’s Core Business Workflows.
The company has formed a strategic partnership with Ferrari (BIT:RACE), enhancing the automaker’s Hypercar team operations with its AI platform. RBC Capital Markets maintained an Outperform rating with a price target of $1,100, noting ServiceNow’s potential to become an "AI agent of agents." This ambition could lead to strategic importance and potential revenue growth. ServiceNow’s integration of AI technologies into its offerings is seen as a significant differentiator in the competitive enterprise software market. These recent developments underscore ServiceNow’s ongoing efforts to innovate and expand its market presence.
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