On Friday, TD Cowen maintained a positive outlook on ServiceNow (NYSE:NOW) shares, reiterating a Buy rating and a price target of $1,300.00. The stock, currently trading near its 52-week high of $1,157.90, has demonstrated strong momentum with a 55% gain over the past six months. According to InvestingPro analysis, the company is currently trading above its Fair Value, reflecting high investor expectations. Derrick Wood of TD Cowen offered insights ahead of the company's fourth-quarter earnings report, which is scheduled for January 29. Wood's analysis, based on industry conversations, suggests that ServiceNow is experiencing strong performance from its System Integrators (SIs) relative to targets and witnessing increased adoption of its Pro Plus product.
Wood highlighted the growing interest in ServiceNow's Workflow Data Fabric and pointed to highly bullish data on government spending. Sales hiring trends were also viewed positively, indicating overall strong performance and expectations for a solid earnings beat and guidance in line with consensus on a constant currency basis. With impressive gross profit margins of 79.24% and a robust revenue growth of 23.48% over the last twelve months, ServiceNow has maintained its position as a prominent player in the software industry. InvestingPro subscribers can access 15+ additional insights and detailed financial metrics in the comprehensive Pro Research Report.
TD Cowen anticipates continued momentum with ServiceNow's Generation AI (GenAI) product suites. The firm expects ServiceNow to exceed its committed remaining performance obligation (cRPO) growth guidance by approximately 100 basis points, relative to the 21.5% constant currency guide provided. The forecast also includes an in-line guide for fiscal year 2025 on subscription revenue constant currency growth, operating margins, and free cash flow margins, with TD Cowen modeling around 21%, 30%, and 32%, respectively.
ServiceNow's ability to leverage GenAI monetization through Pro Plus and its new data solutions is seen as a key driver of its growth trajectory. TD Cowen believes that the company's focus on front-office use cases will contribute to its robust growth algorithm, positioning it to reach over $13 billion in revenue scale. The company's current market capitalization of $234 billion and "GREAT" financial health score from InvestingPro underscore its strong market position, with the next earnings report scheduled for January 29. The reiterated Buy rating and $1,300 price target reflect TD Cowen's confidence in ServiceNow's execution capabilities and growth prospects in the software industry.
In other recent news, ServiceNow has experienced a series of positive adjustments from financial firms. BofA Securities increased the price target for ServiceNow shares from $1,075.00 to $1,280.00, maintaining a Buy rating. This adjustment is based on strong performance in deal activities for the fourth quarter, along with robust activity in core IT Service Management and IT Operations Management categories. Furthermore, JMP Securities raised the price target for ServiceNow shares from $1,000 to $1,300, maintaining a Market Outperform rating.
ServiceNow has also announced plans to acquire Cuein, an AI-driven conversation data analysis firm. The acquisition is expected to enhance ServiceNow's Workflow Data Fabric technology and align with the company's strong growth trajectory. Barclays (LON:BARC) has maintained an Overweight rating for ServiceNow, demonstrating confidence in the company's continued growth and ability to integrate new technologies.
Cantor Fitzgerald initiated an Overweight rating for ServiceNow, highlighting its successful growth among large enterprise customers. Evercore ISI analysts have also expressed optimism towards ServiceNow, maintaining an Outperform rating. These recent developments suggest a confident outlook for ServiceNow's future financial performance.
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