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Investing.com - Oppenheimer lowered its price target on ServiceNow shares (NYSE:NOW) to $130 from $175 while maintaining an Outperform rating, the firm said Tuesday. The stock currently trades at $87.79, down 43% year-to-date, and InvestingPro data suggests the shares are undervalued at current levels with a Fair Value of $130.
The firm reduced its price target on lower software group multiples. Oppenheimer said the first-quarter earnings update is unlikely to dispel the current AI disruption narrative for ServiceNow.
A more constructive post-earnings estimate revision trend could support the stock given depressed expectations after a sharp year-to-date selloff, the firm said. With earnings scheduled for April 22, investors will be watching closely. For the first quarter, Oppenheimer expects to see bullish AI metrics, higher margins from internal AI operational benefits and less hiring, and increasing capital returns. The company already boasts impressive gross profit margins of 77.5% and generated $4.6 billion in free cash flow over the last twelve months.
The upside magnitude in organic growth metrics including CRPO, subscription revenue and guidance may be tempered by soft Federal Government activity, the firm said. Consensus feedback from recent industry conversations indicated a more measured enterprise software buying environment versus last quarter, beyond AI spend.
ServiceNow provides cloud-based workflow automation and IT service management software to enterprise customers.
In other recent news, ServiceNow has made significant advancements in its product offerings by integrating AI capabilities across its entire portfolio. This move includes enhancements in data connectivity, workflow execution, security, and governance, all provided at no additional cost. The company introduced the Context Engine, a system designed to leverage ServiceNow’s existing data structures to inform AI agent decisions. Analysts have provided varied insights on these developments. Bernstein reiterated an Outperform rating, emphasizing the importance of predictability and security in ServiceNow’s business processes. JMP Securities upgraded ServiceNow to Market Outperform, highlighting the company’s comprehensive AI integration. However, UBS downgraded the stock to Neutral from Buy, citing concerns about its positioning in the AI landscape. Additionally, BTIG adjusted its price target downward due to concerns about slowing revenue growth, despite maintaining a Buy rating. These updates reflect the diverse perspectives on ServiceNow’s strategic direction and market positioning.
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