On Thursday, Stifel analysts maintained their Buy rating and $1,175.00 price target on ServiceNow (NYSE:NOW), despite the stock experiencing a decline of approximately 8% in after-hours trading. According to InvestingPro data, ServiceNow, with its impressive $207 billion market cap, is currently trading slightly above its Fair Value, though the stock has shown strong momentum, trading near its 52-week high with a remarkable 79% gross profit margin. The drop followed the company's announcement of current remaining performance obligations (cRPO) that, while exceeding expectations, did not match the previous quarter's more significant beat. ServiceNow's management attributed the smaller margin of outperformance to a combination of factors including less early renewal activity and a higher mix of on-premises software sales. The company maintains robust financial health, earning a "GREAT" rating from InvestingPro, supported by strong revenue growth of 22% in the last twelve months.
The first-quarter cRPO guidance for 2025 was aligned with consensus estimates but did not meet Stifel's higher expectations of 21-22%. ServiceNow's management has opted for a more cautious approach to their guidance compared to the previous year, taking into account a more significant impact from U.S. Federal business seasonality and a new hybrid pricing model for their Agent product.
Despite the cautious guidance and the smaller than expected cRPO beat, Stifel analysts pointed to the strong momentum of ServiceNow's artificial intelligence generation tool, genAI. Management highlighted that the company has acquired over 1,000 Pro+ customers, observing a 150% quarter-over-quarter growth in Pro+ deals. This growth is consistent with the checks performed by Stifel analysts.
In conclusion, while the immediate upside was not as high as anticipated, Stifel analysts believe that ServiceNow's expanding platform, growing sales pipeline, momentum in securing large deals, rapidly advancing genAI business, and a substantial renewal cohort for the fiscal year 2025, all contribute to the potential for increased cRPO estimates as the year progresses.
In other recent news, ServiceNow has seen a series of significant developments. The company reported a 21% year-over-year increase in both subscription and total revenues for the fourth quarter of 2024, amounting to $2,866 million and $2,957 million respectively. Analysts from BMO Capital, KeyBanc Capital Markets, Canaccord Genuity, Needham, Bernstein SocGen Group, and JMP Securities have offered varied perspectives on the company's stock, with price targets ranging from $1,021 to $1,300.
ServiceNow's strategic initiatives have also been a focal point, with the introduction of AI Agent Orchestrator and the announcement of a strategic partnership with Visa (NYSE:V) to modernize their Dispute Management Service using ServiceNow's AI technology. The company's shift to a consumption-based monetization model set to launch in 2025 was also noted by analysts.
These are recent developments that reflect ServiceNow's ongoing growth and strategic evolution. The company's robust financial performance, innovative AI advancements, and strategic partnerships underscore its strong position in the market.
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