On Thursday, Stifel, a financial services company, adjusted its price target for ServiceNow (NYSE: NYSE:NOW), a digital workflow company, raising it to $1,100 from the previous target of $900. The firm sustained its Hold rating on the stock, signaling a neutral stance on investment action. The stock currently trades at $1,143.45, near its 52-week high of $1,157.90, with InvestingPro data indicating the stock is trading above its Fair Value.
ServiceNow is recognized for its innovative approach to enterprise service management, challenging traditional providers by adeptly handling the increasing complexity of IT environments.
With impressive gross profit margins of 79.24% and revenue growth of 23.48% over the last twelve months, the company is gaining market share and expanding its product offerings, tapping into an additional $54 billion market opportunity.
ServiceNow's strategy includes investing in its platform, enhancing customer success, strengthening its brand, and attracting talent. These efforts are aimed at acquiring new customers and deepening its engagement with existing ones.
Despite ServiceNow's disruptive market presence and growth potential, Stifel has opted for a cautious approach due to current valuation levels. The firm is looking for clearer insights into how the introduction of GenAI technology will affect ServiceNow's financial performance before recommending new investments in the company's shares. InvestingPro analysis reveals multiple valuation indicators, including a P/E ratio of 175.28, suggesting premium pricing. Subscribers can access 18 additional ProTips and comprehensive valuation metrics in the Pro Research Report.
Stifel's valuation is based on a 10-year Discounted Cash Flow (DCF) analysis, which presumes a Weighted Average Cost of Capital (WACC) of 10% and a Free Cash Flow (FCF) Compound Annual Growth Rate (CAGR) of 22%. The new price target of $1,100 corresponds to 17.1 times the Enterprise Value to Calendar Year 2025 Estimated Revenue (EV/CY25E revenue) and 54 times the EV/CY25E FCF. Stifel considers these multiples to be fair for a high-growth company that is expected to sustain revenue and FCF growth rates above 20% over the next three years.
In other recent news, ServiceNow has seen a surge of positivity from financial firms. TD Cowen raised its price target for ServiceNow to $1,300, spotlighting the company as a Best Idea for 2025, based on the introduction of new AI-driven products. Needham also increased its stock price target from $1,075 to $1,150, maintaining a "Buy" rating. This followed discussions about ServiceNow's upcoming renewal cycle and product pricing strategies.
Scotiabank (TSX:BNS) initiated coverage with a Sector Outperform rating and a price target of $1,230, highlighting ServiceNow's success with its AI-driven Pro Plus product. Mizuho (NYSE:MFG) Securities also raised its price target for ServiceNow to $1,070, following a discussion with the company's CFO about the strong customer demand driving momentum for the company's GenAI initiative and Pro Plus product.
ServiceNow's recent developments include deepening its strategic alliance with Microsoft (NASDAQ:MSFT), integrating its AI agent with Microsoft Copilot to enhance front-office business processes. The company also revised its full-year 2024 subscription revenue forecast upwards to between $10.655 billion and $10.66 billion.
Other developments include collaborations with industry leaders NVDA and SNOW, the appointment of Amit Zavery as President, COO, and CPO, and continued operations in the federal sector.
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