On Friday, RBC Capital Markets increased its price target on ServiceNow (NYSE:NOW) shares, lifting the figure to $1,210 from the previous $1,045, while reiterating an Outperform rating. With the stock currently trading at $1,061.52 and analyst targets ranging from $716 to $1,300, the adjustment reflects the firm's confidence in the company's long-term growth potential, particularly as it expands beyond its core IT services.
According to InvestingPro data, ServiceNow's impressive 23.48% revenue growth and 79.24% gross profit margins support this optimistic outlook.
ServiceNow, which offers cloud-based platforms and solutions to streamline enterprise operations, was highlighted by RBC Capital as a "gold standard" for long-term investment. The firm's analysts believe that ServiceNow's growth will be sustained and predominantly organic, benefiting from the early stages of GenAI advancements that are expected to evolve over the next decade.
With a market capitalization of $219.4 billion and a GOOD financial health score from InvestingPro, the company demonstrates strong fundamentals. Subscribers can access 15+ additional ProTips and comprehensive valuation metrics through InvestingPro's detailed research reports.
As ServiceNow ventures into areas beyond IT, such as HR, finance, facilities, legal, and procurement, it is poised to become a comprehensive platform for enterprise applications. This versatility is seen as a key driver for the company's continued expansion, reflected in its strong five-year revenue CAGR of 28%.
The new price target is based on a valuation of 19 times RBC Capital's calendar year 2025 enterprise value/revenue estimate. This valuation represents a slight premium over the average of the firm's high-efficiency comparison group, justified by ServiceNow's superior growth and margin profile. The price target also implies a 60.5 times multiple on enterprise value to expected free cash flow for the calendar year 2025, supporting the Outperform rating. Currently trading at a P/E ratio of 161.58x, the stock appears to be trading above its InvestingPro Fair Value.
ServiceNow's strategic positioning and the potential for its platform to underpin a broad range of enterprise applications underpin RBC Capital's optimistic outlook. The analyst's statement underscores the company's promising trajectory in the evolving digital transformation landscape.
In other recent news, ServiceNow, a leader in digital workflow solutions, has seen a flurry of activity from financial firms.
TD Cowen raised its price target for the company to $1,300, spotlighting the firm as a Best Idea for 2025, based on the introduction of new AI-driven products. Needham also increased its stock price target from $1,075 to $1,150, maintaining a "Buy" rating. This followed discussions about ServiceNow's upcoming renewal cycle and product pricing strategies.
ServiceNow has also been the focus of Raymond (NS:RYMD) James, which initiated coverage with an Outperform rating. Meanwhile, Stifel raised its price target for the company while maintaining a Hold rating. Scotiabank (TSX:BNS) initiated coverage with a Sector Outperform rating and a price target of $1,230, highlighting ServiceNow's success with its AI-driven Pro Plus product.
ServiceNow recently updated its executive severance policy, standardizing severance benefits for the executive team. The company also reported impressive gross profit margins of 79% and robust revenue growth of 23% in the last twelve months.
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