Gold prices bounce off 3-week lows; demand likely longer term
On Tuesday, Oppenheimer analysts increased their price target for ServiceNow (NYSE:NOW) shares to $1,100 from the previous target of $970, while maintaining an Outperform rating. With a current market capitalization of $202.4 billion and strong analyst support (consensus rating of 1.52, indicating "Buy"), the stock has delivered a 34.6% return over the past year. The revision follows ServiceNow’s investor meeting held on Monday, where the company outlined its financial targets and business strategies. According to InvestingPro analysis, the stock is currently trading slightly above its Fair Value.
During the meeting, ServiceNow set a goal of achieving $1 billion in Annual Contract Value (ACV) for its artificial intelligence (AI) segment by 2026 and projected faster Free Cash Flow (FCF) margin growth for 2027, aiming for a 100 basis points increase compared to the prior 50 basis points target. The company, which boasts impressive gross profit margins of 78.9% and strong revenue growth of 21%, also reaffirmed its near-term guidance and provided greater clarity on its strategies for monetizing its installed base, the AI business, and the Public Sector’s growth trajectory. Additionally, updates on the financials and new product offerings were discussed.
The analysts at Oppenheimer cited several reasons for their increased confidence in ServiceNow’s prospects. These include the resilience of the company’s core technology workflow solutions, its superior sales execution, and the sustained momentum in adjacent markets, such as customer, security, employee, creator workflow solutions, and various industries. The firm’s large and rapidly expanding generative AI business, high retention rates, improving operating efficiency, and a significant total addressable market (TAM) of $350 billion were also highlighted as positive factors.
Despite near-term macroeconomic and Federal pressures, ServiceNow’s guidance was deemed prudent by the analysts. The updated price target reflects the firm’s potential to surpass its $15 billion subscription revenue target for 2026 and to grow profit margins. The comprehensive review of ServiceNow’s investor meeting underscored the company’s position as a strong compounder with sound fundamentals, poised for continued growth in the technology sector. For a deeper understanding of ServiceNow’s financial health (rated "GREAT" by InvestingPro), including 15+ additional ProTips and comprehensive valuation metrics, investors can access the detailed Pro Research Report available exclusively to subscribers.
In other recent news, ServiceNow has been the subject of several positive analyst assessments following its Financial Analyst Day presentation. The company maintained its Buy ratings from multiple firms, with Needham setting a price target of $1,050, Truist Securities at $1,200, and Goldman Sachs at $1,150. These ratings reflect confidence in ServiceNow’s growth prospects, particularly its projected subscription revenue exceeding $15 billion by fiscal year 2026. Goldman Sachs noted ServiceNow’s strategic shift towards broader applications beyond IT-centric workflows, bolstered by its integration of data and AI.
Truist Securities highlighted ServiceNow’s advancements in AI product adoption, which could enhance profitability. Erste Group upgraded ServiceNow’s stock from Hold to Buy, citing positive revenue projections and a focus on innovative products aimed at boosting customer productivity. The firm anticipates a 19% to 19.5% rise in subscription-based software revenues in the second quarter, with annual software revenues expected to reach approximately $12.7 billion. ServiceNow’s internal AI use is also recognized as a potential driver for improved financial performance.
These developments collectively underscore a strong growth outlook for ServiceNow, as analysts express confidence in its strategic initiatives and financial targets.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.