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Investing.com - Truist Securities has reiterated its Buy rating on ServiceNow (NYSE:NOW) with a price target of $1,200.00. The company, currently trading near $918, has demonstrated impressive gross profit margins of 78.5% and strong revenue growth of 21% over the last twelve months.
The research firm addressed concerns about artificial intelligence potentially threatening ServiceNow’s seat-based growth model. According to Truist Securities, ServiceNow has indicated it is not currently experiencing reductions in seat counts among its customers. InvestingPro analysis shows the company maintains a strong financial health score, with particularly robust cash flows to cover its moderate debt levels.
The company did acknowledge organizations might "bend the hiring curve" over time, which aligns with previous statements from ServiceNow CFO Gina Mastantuono about the company’s own hiring practices. Mastantuono has noted on multiple occasions that ServiceNow has adjusted its hiring needs based on AI efficiencies internally.
Truist Securities pointed out that ServiceNow’s incorporation of consumption-based elements to its business model represents the company’s response to this potential future headwind.
The research firm believes that "continued strong execution will be the only way to put this narrative fully to rest," suggesting ServiceNow needs to maintain performance to address concerns about AI’s impact on its growth model.
In other recent news, ServiceNow Inc. has entered into a significant agreement with the U.S. General Services Administration (GSA) to promote AI-driven modernization across federal agencies. The OneGov agreement offers federal agencies discounts of up to 70% on ServiceNow’s software, potentially boosting workflow efficiencies by up to 30% through streamlined business processes. Additionally, Stifel has reiterated its Buy rating for ServiceNow, citing an uptick in federal business performance this quarter, following a decline in the previous quarter.
In Brazil, ServiceNow has partnered with SENAI-SP to launch a statewide AI skills training program, providing courses in AI, digital workflow automation, and low-code/no-code development. This initiative is part of ServiceNow University and aims to equip Brazilians with essential digital skills. Furthermore, ServiceNow has formed a technology partnership with the DFL Deutsche Fußball Liga, becoming the Official Workflow Partner for Germany’s top football leagues. This collaboration aims to improve automation and efficiency in business workflows, enhancing the fan experience in the Bundesliga and Bundesliga 2.
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