On Thursday, RBC Capital Markets updated its outlook on ServiceNow (NYSE:NOW), raising the stock's price target to $1,045 from the previous $985, while maintaining an Outperform rating. The revision follows the company's third-quarter performance, which surpassed expectations, and an increase in the subscription revenue forecast for the calendar year 2024.
The firm's analysis highlighted several positive outcomes from ServiceNow's recent quarter, including the growing strength of its platform, the successful adoption of its Pro Plus and Now Assist products, and the launch of Workflow Data Fabric. These factors, along with a solid pipeline heading into the year's end, were central to the revised price target.
ServiceNow's execution was described as impressive, with the company showing significant upside in the third quarter of 2024. The raised guidance for subscription revenue in the calendar year 2024 exceeded the actual results, indicating a robust business trajectory.
The analyst from RBC Capital Markets expressed confidence in the potential for ServiceNow to capitalize on the momentum around GenAI monetization as the calendar year 2025 approaches. This optimism is also tied to the anticipation of a stronger-than-expected fourth-quarter budget flush.
In conclusion, RBC Capital Markets recommends ServiceNow as a top stock pick, citing the company's ability to outperform in the coming quarters. The increased price target to $1,045 is based on higher estimates and the target multiple.
In other recent news, ServiceNow has been the subject of positive attention from analysts. Canaccord Genuity has raised its price target for the company to $1,000, maintaining a bullish outlook based on ServiceNow's robust execution capabilities and growth opportunities. Similarly, Goldman Sachs has also demonstrated confidence in the company, increasing its price target to $1,050 following impressive financial metrics.
ServiceNow has reported a strong third quarter, with a 22.5% year-over-year increase in subscription revenue, reaching $2.715 billion. The company's Remaining Performance Obligations (RPO) also showed a growth of 33% year-over-year, indicating solid demand for its services. Furthermore, ServiceNow has increased its full-year 2024 subscription revenue forecast to between $10.655 billion and $10.66 billion.
In addition to financial growth, ServiceNow announced the appointment of Amit Zavery as President, Chief Product Officer, and COO, a move that analysts from Jefferies have expressed interest in. These recent developments are part of ServiceNow's ongoing strategy targeting a trajectory towards $30 billion in revenue.
InvestingPro Insights
ServiceNow's impressive performance, as highlighted by RBC Capital Markets, is further supported by real-time data from InvestingPro. The company's market capitalization stands at a robust $186.85 billion, reflecting its strong position in the software industry. ServiceNow's revenue growth remains solid, with a 24.17% increase over the last twelve months as of Q2 2024, aligning with the analyst's positive outlook on the company's business trajectory.
InvestingPro Tips underscore ServiceNow's financial strength. The company boasts impressive gross profit margins, which is evident in the data showing a gross profit margin of 79.07% for the last twelve months as of Q2 2024. This high profitability supports RBC's confidence in ServiceNow's ability to capitalize on future opportunities, including GenAI monetization.
Additionally, ServiceNow's stock has demonstrated strong performance, with a 63.73% price total return over the past year. This aligns with the InvestingPro Tip indicating a high return over the last year, further validating RBC's decision to maintain an Outperform rating.
For investors seeking a deeper understanding of ServiceNow's potential, InvestingPro offers 17 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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