On Thursday, KeyBanc adjusted its stock price target on ServiceNow (NYSE: NYSE:NOW) shares, reducing it to $950.00 from the previous $1,000.00, while maintaining an Overweight rating. The firm noted that ServiceNow's recent quarterly performance did not surpass guidance as much as anticipated, which included their own estimates. Despite solid revenue and margin figures, it was the non-revenue top-line metrics that drew attention.
ServiceNow's current bookings growth was reported at 13.3%, only 2.4% above KeyBanc's estimates. This growth represents a significant deceleration from the previous quarter's 19.8% and last year's 25.0%. Although total remaining performance obligation (RPO) continued to outpace current RPO due to lengthier deal terms, total bookings growth dropped to below 10% year-over-year.
Moreover, current billings did not meet expectations, which was attributed to invoicing patterns and timing rather than issues with obtaining signed contracted obligations.
Despite these underwhelming aspects, KeyBanc's estimates for ServiceNow remain largely unchanged, and their terminal multiple is consistent. Still, an increased risk-free rate necessitated a higher discount rate, leading to the lowered price target.
The firm expressed continued optimism about ServiceNow, highlighting that the company passed on the full subscription revenue upside from the quarter into the full-year guidance, a move not always seen post-Q1.
Furthermore, the pipeline coverage ratio is reportedly higher than at the same time last year. KeyBanc also pointed out the added value from ServiceNow's implementation of its own AI technology, which contributes to margin and cash flow improvements. Despite a less than stellar start to 2024, KeyBanc's outlook on ServiceNow remains positive.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.