U.S. stocks edge higher; solid earnings season continues
On Tuesday, RBC Capital Markets adjusted its outlook on ServiceNow (NYSE:NOW) shares, reducing the price target to $986 from the previous $1,210, while continuing to endorse the stock with an Outperform rating. The stock, currently trading at $813.08, has experienced a significant 26% decline year-to-date, though InvestingPro data shows it maintains impressive gross profit margins of 79.2% and strong revenue growth of 22.4% over the last twelve months. ServiceNow, a leading digital workflow company with a substantial market capitalization of $169.7 billion, has recently announced its intention to purchase Moveworks, a provider of agentic AI assistants, for $2.85 billion. This acquisition is expected to enhance ServiceNow’s agentic technology roadmap and is seen as a positive complement to its existing capabilities, rather than a negative indicator. According to InvestingPro’s comprehensive analysis, the company maintains a healthy financial position with moderate debt levels and strong cash flows.
The deal with Moveworks, which is set to accelerate ServiceNow’s agentic AI strategy, has been well-received by RBC Capital analysts. They believe that the acquisition is a strategic fit for ServiceNow and will not detract from the company’s current agentic strengths. According to the analysts, the current stock price, which is approximately 31.7 times their projected calendar year 2026 free cash flow estimate, represents an attractive opportunity for long-term investment.
ServiceNow’s recent quarterly earnings for Q1/25 have been taken into account by RBC Capital, and the firm looks forward to the next significant event for the company. The upcoming Knowledge conference, scheduled from May 6-8, is anticipated to provide further insights into ServiceNow’s agentic strategy, as well as details on pricing and packaging. The analysts have reiterated their Outperform rating while adjusting the price target to reflect the compressed multiples of peers.
In conclusion, RBC Capital Markets has shown confidence in ServiceNow’s strategic direction and market position, despite the adjustment in the price target. The acquisition of Moveworks is seen as a key step in fortifying ServiceNow’s offerings and capabilities in the AI space. Investors and market watchers are advised to look out for the Knowledge conference in May for more updates on the company’s progress and strategic initiatives. For deeper insights into ServiceNow’s valuation and growth prospects, InvestingPro subscribers can access an extensive Pro Research Report, which includes detailed financial health metrics, fair value analysis, and 18 additional ProTips about the company’s performance and outlook.
In other recent news, ServiceNow announced a definitive agreement to acquire Moveworks, an AI assistant provider, for $2.85 billion, which is a combination of cash and stock. This acquisition aims to enhance ServiceNow’s AI and automation capabilities by integrating Moveworks’ front-end AI assistant technology. Analysts from various firms have weighed in on this development. JMP analysts reaffirmed their Market Outperform rating with a $1,300 price target, maintaining their non-GAAP earnings per share estimates through 2027, and projecting consistent revenue growth. Goldman Sachs reiterated a Buy rating with a $1,200 price target, viewing the acquisition as strategically valuable for enhancing ServiceNow’s offerings. Mizuho (NYSE:MFG) adjusted its price target to $1,100 from $1,210, while maintaining an Outperform rating, citing the acquisition’s potential to bolster AI monetization efforts. Evercore ISI also maintained an Outperform rating and a $1,150 price target, highlighting the acquisition’s potential impact on future financials. Canaccord Genuity confirmed a Buy rating with a $1,275 target, emphasizing the acquisition’s alignment with ServiceNow’s strategic direction to enhance AI-driven enterprise search capabilities. These developments reflect ServiceNow’s commitment to expanding its AI capabilities and maintaining a competitive edge in the market.
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