On Thursday, Stifel analysts maintained their Buy rating and a price target of $1,175.00 on ServiceNow (NYSE:NOW) shares. With a current market capitalization of $216.4 billion and trading at $1,049.08, InvestingPro data shows the stock is slightly overvalued based on its proprietary Fair Value model. The affirmation comes after discussions with several System Integrator (SI) contacts, who reported a continuation of solid enterprise deal activity similar to that seen in the third quarter.
These insights lead analysts to anticipate that ServiceNow will likely achieve current Remaining Performance Obligations (cRPO) growth at least consistent with the third quarter's 150 basis points, translating to a 23% year-over-year growth on a constant currency basis, which exceeds the company's guidance of 21.5%.
The conversations with SIs revealed a robust volume of large deal bookings and an increasing demand for newer workflows. There was also a noted uptick in Pro+ deals, with partners indicating an approximate total of 1,000 Pro+ customers.
This growth aligns with ServiceNow's impressive financial performance, maintaining a robust gross profit margin of 79.24% and achieving revenue growth of 23.48% over the last twelve months. InvestingPro subscribers can access 16 additional key insights about ServiceNow's performance and valuation metrics. While the first half of 2025 pipelines appear healthy, early renewals are expected to result in normal seasonality, which typically sees a quarter-over-quarter decline in year-over-year cRPO growth by about 150 basis points. Consequently, the analysts project that ServiceNow's first quarter 2025 cRPO guidance will be set between 21%-22%, slightly above the consensus estimate of 20.6%.
Despite the anticipated seasonal fluctuation, the strong commentary for the first half of the year and a significant number of renewals due in the fiscal year 2025 suggest potential for outperformance. Stifel analysts see the possibility of surpassing their own estimates for the fiscal year 2025 cRPO growth of 20.5% on a constant currency basis, which is already slightly ahead of the consensus estimate of 20.4%.
The analysts concluded that ServiceNow's expanding platform, growing pipeline, momentum in securing large deals, and the opportunities presented by generative AI should enable the company to sustain over 20% growth in both revenue and free cash flow, alongside margin expansion in the coming years. InvestingPro's analysis supports this outlook, rating ServiceNow's overall financial health as "GREAT" with a score of 3.0 out of 5, particularly strong in growth and profitability metrics.
In other recent news, ServiceNow has been the focus of several financial firms. Piper Sandler has increased its price target on ServiceNow shares to $1,200, maintaining an Overweight rating. This adjustment is due to changes in the valuation of ServiceNow's peer group. This comes alongside the company's decision to invest in expanding its cloud datacenter infrastructure to support growth. Notably, ServiceNow is set to benefit from the adoption of Generative AI at the application layer, according to Piper Sandler.
RBC Capital Markets has also increased its price target on ServiceNow shares to $1,210, emphasizing the company's long-term growth potential. The firm has highlighted ServiceNow as a "gold standard" for long-term investment, with growth expected to be predominantly organic.
ServiceNow has also updated its executive severance policy, standardizing severance benefits for the executive team. This policy change is designed to support the executive leadership in transition scenarios.
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