ServiceNow (NOW) is drawing investor interest as it ramps up efforts to monetize generative AI across its platform. With quarterly earnings on the horizon, the recent launch of its AI Experience has attracted attention in the enterprise software space.
See our latest analysis for ServiceNow.
Despite strong buzz around its generative AI offerings and fresh product launches, ServiceNow’s share price has struggled in 2024, down 15.7% year-to-date and recently closing at $888.71. Over the past year, total shareholder return fell by 5.3%, which is a stark contrast to the company’s robust 160% three-year total shareholder return. While momentum has cooled in the short term, ServiceNow’s long-run track record continues to stand out.
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After an impressive run, ServiceNow’s stock is down sharply this year even as the company accelerates growth in AI. Does this pullback represent an undervalued entry point, or is the market simply pricing in all the upside already?
With ServiceNow’s last closing price at $888.71 and the narrative’s fair value at $1,142.59, the most widely followed narrative positions the stock as trading at a meaningful discount. Here is what is shaping this view according to the analyst consensus:
ServiceNow’s AI focus and strategic acquisitions are poised to drive revenue growth and enhance net margins through integrated, efficient solutions. Expansion into CRM, industry workflows, and public sector positions ServiceNow for significant future growth and revenue stability.
Read the complete narrative.
What are the bold assumptions underneath this premium? Analysts are banking on ambitious growth for revenue, profits, and margins. But what financial leap justifies a multiple more suited to industry giants? Find out how this narrative’s math projects ServiceNow into rarefied territory and see which aggressive forecasts support that eye-catching target.
Result: Fair Value of $1,142.59 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, unpredictable U.S. federal budgets and intense competition in AI could quickly challenge the positive outlook for ServiceNow’s future growth.
Find out about the key risks to this ServiceNow narrative.
While consensus targets point to big upside, ServiceNow’s current price-to-earnings ratio of 111x stands far above the US Software industry average of 34.8x, its peer average of 62.2x, and even the fair ratio of 50.2x. Such a gap highlights valuation risk if future expectations falter. The key question is whether ServiceNow can deliver enough growth to justify this premium.
