On Thursday, Citi maintained a Buy rating on ServiceNow (NYSE: NYSE:NOW) and increased the stock's price target to $906 from the previous $896. The firm's analyst cites continued positive sentiment based on recent partner checks which indicate solid demand for ServiceNow's offerings, including greater interest in the Pro Plus SKU.
The report highlights that the company is experiencing larger deal sizes and stronger pipelines compared to the same period last year.
ServiceNow's performance has been strong, outpacing its peers, despite the high valuation bar set by the market. Citi's analyst believes that the upcoming Analyst Day and Knowledge Conference, alongside potential for a second-half acceleration, present a positive event trajectory for the company. The raised price target reflects a roll forward in valuation.
The firm recognizes ServiceNow as a leading pick among megacap software companies, particularly due to its advantageous position to benefit from the increasing automation of IT and mid-office processes. This trend is anticipated to be a significant area for the adoption of Generative AI (GenAI), which is expected to be a substantial catalyst for the company's growth.
The analyst projects that ServiceNow's unique market position and competitive edge will contribute to a sustained compound annual growth rate of over 20% in top-line revenue and will also facilitate healthy margin expansion. This outlook is based on the company's current trajectory and market conditions as observed and analyzed by the firm.
InvestingPro Insights
ServiceNow's impressive gross profit margin of 78.59% and a revenue growth of 23.82% over the last twelve months as of Q1 2023 reinforce the positive outlook presented by Citi's analyst. The company's strong financial performance is also characterized by a high earnings multiple, with a P/E Ratio of 87, indicating investor confidence in its future earnings potential. Additionally, ServiceNow's ability to generate substantial returns, evidenced by a 54.72% one-year price total return, showcases its robust market presence and investor optimism about its growth prospects.
InvestingPro Tips highlight ServiceNow as a prominent player in the Software industry, with a competitive edge that is likely to continue driving its market performance. The company's moderate level of debt and the capacity of its cash flows to sufficiently cover interest payments provide a stable financial foundation for future investments and expansion. For investors seeking comprehensive analysis and additional insights, there are 16 more InvestingPro Tips available for ServiceNow at Investing.com. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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