On Thursday, Piper Sandler updated its outlook on ServiceNow (NYSE:NYSE:NOW) shares, raising the price target to $1,000 from the previous $850 while maintaining an Overweight rating. The firm's analysis follows ServiceNow's third-quarter performance, which was marked by robust results, significant large deal momentum, and solid adoption of artificial intelligence (AI) technologies.
ServiceNow's AI tool, Now Assist, was particularly highlighted as a growth driver, having secured 44 customers with expenditures exceeding $1 million during the third quarter. This customer engagement is seen as evidence of the growing traction for ServiceNow's broader AI offerings.
The analyst from Piper Sandler expressed confidence in ServiceNow's third-quarter execution, emphasizing that the company's GenAI capabilities are likely to further enhance its strategic position within large enterprise markets. The endorsement of the company's AI-driven strategy is reflected in the increased price target.
ServiceNow's market performance and strategic initiatives, particularly in AI, have led to a positive outlook from analysts. The updated price target of $1,000 signifies an expectation for the company's continued growth and dominance in providing enterprise solutions that leverage AI technology.
In other recent news, ServiceNow has had a notable performance in its third quarter, with subscription revenue marking a 22.5% year-over-year increase to reach $2.715 billion. Analyst firms Stifel, Baird, RBC Capital Markets, Canaccord Genuity, and Goldman Sachs have all raised their price targets for ServiceNow, reflecting confidence in the company's growth trajectory. The company's GenAI technology, particularly the Now Assist product, has been instrumental in securing high-value contracts.
ServiceNow has also increased its full-year 2024 subscription revenue forecast to between $10.655 billion and $10.66 billion. The company's recent developments include extended collaborations with industry leaders NVDA and SNOW and the appointment of Amit Zavery as President, COO, and CPO. Despite concerns about ServiceNow's partnership with Carahsoft, the company's U.S. Federal business remains unaffected.
These recent developments are part of ServiceNow's ongoing strategy as it targets a trajectory towards $30 billion in revenue. The company's execution was described as impressive, with the company showing significant upside in the third quarter of 2024.
InvestingPro Insights
ServiceNow's impressive third-quarter performance and growing AI adoption, as highlighted in Piper Sandler's analysis, are further supported by key financial metrics and insights from InvestingPro. The company's revenue growth of 24.17% over the last twelve months as of Q2 2024 aligns with the strong momentum observed in large deals and AI tool adoption.
ServiceNow's gross profit margin of 79.07% is particularly noteworthy, reflecting the company's efficiency in delivering its services. This aligns with one of the InvestingPro Tips, which points out ServiceNow's "impressive gross profit margins." This high profitability could be a key factor in the company's ability to invest in and develop AI technologies like Now Assist.
The stock's strong performance is evident in its 63.73% price return over the past year, trading at 95.59% of its 52-week high. This performance supports another InvestingPro Tip indicating a "high return over the last year." However, investors should note that the stock is trading at a high P/E ratio of 162.2, suggesting high growth expectations are already priced in.
For those interested in a deeper analysis, InvestingPro offers 15 additional tips for ServiceNow, providing a comprehensive view of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.