On Thursday, RBC Capital maintained its Outperform rating on ServiceNow (NYSE:NOW) and increased the price target from $850.00 to $880.00.
The adjustment reflects the company's strong performance in the second quarter of 2024, which showcased significant growth in committed remaining performance obligations (cRPO) and a raised subscription revenue forecast for the calendar year 2024.
The company's recent developments have been positive, with ServiceNow demonstrating an impressive cRPO acceleration at a large scale. This growth metric is often seen as a leading indicator of future revenue potential, indicating robust business health and customer commitment.
In addition to the strong quarter, ServiceNow's updated guidance for subscription revenue for the latter half of 2024 signals the management's confidence in the company's ongoing performance.
The forecast suggests that ServiceNow is expecting continued growth and financial success in the upcoming periods.
The firm also highlighted the growing momentum around ServiceNow's products, specifically GenAI and ProPlus. These offerings are gaining traction, and the company is beginning to see tangible results from GenAI monetization.
RBC Capital concludes that ServiceNow remains a compelling investment opportunity and continues to recommend it as a top pick, especially as the company heads into what is projected to be a strong second half of the year 2024. The increased price target to $880 reflects this optimism and the anticipated positive impact of the company's strategic initiatives and product offerings.
In other recent news, ServiceNow has been experiencing significant developments. Canaccord Genuity has raised the target price for ServiceNow to $850, maintaining a buy rating.
The firm commends ServiceNow's successful AI execution and its ability to monetize AI-driven innovations early, contributing to strategic and larger business engagements.
ServiceNow's Q2 2024 earnings report exceeded expectations, with substantial growth in subscription revenue, CRPO, and operating margin. The company's Gen AI strategy and the upcoming RaptorDB have seen significant adoption, and leadership changes were announced to enhance compliance and customer satisfaction.
ServiceNow has also embarked on major global collaborations and expansions, including the largest telecom deal in Canada and new cloud services in the UAE.
The company's subscription revenue and CRPO increased by 23% and 22.5% year-over-year, respectively, while the operating margin exceeded 27%. Additionally, ServiceNow secured 88 deals with over $1 million in net new ACV and announced the acquisition of Raizen to enhance its Gen AI-powered search and knowledge management.
InvestingPro Insights
ServiceNow's recent performance and RBC Capital's raised price target align with some key metrics and insights from InvestingPro. The company's gross profit margin stands at an impressive 78.87% over the last twelve months as of Q1 2024, indicating strong profitability in its operations. Additionally, ServiceNow's revenue growth remains robust, with a 24.4% increase in the same period, further supporting the optimism surrounding the company's financial trajectory.
InvestingPro Tips highlight ServiceNow as a prominent player in the Software industry, with a high earnings multiple and a substantial market capitalization of $150.11 billion. While the P/E ratio is high at 78.15, the low PEG ratio of 0.21 suggests that the company's earnings growth could justify this valuation. Moreover, the company is trading at a high Price / Book multiple of 18.52, which is indicative of the market's high regard for ServiceNow's assets and growth potential.
For investors seeking a more in-depth analysis, InvestingPro offers additional tips on ServiceNow, which can be accessed at https://www.investing.com/pro/NOW. To get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, use the coupon code PRONEWS24. This exclusive offer provides access to a wealth of financial data and expert insights that can help in making informed investment decisions.
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