On Thursday, TD Cowen upheld its Buy rating on shares of ServiceNow (NYSE: NYSE:NOW), with a consistent price target of $870.00. The firm's outlook remains positive ahead of the company's second-quarter earnings report scheduled for July 24.
Despite a mixed response from a commercial partner survey, which echoes sentiments from the first quarter, the firm's confidence is bolstered by several indicators. These include strong federal quarter performance and pipeline growth, an optimistic tone from management this quarter, and various data suggesting potential for stronger growth in the latter half of the year.
ServiceNow's upcoming earnings are anticipated to slightly surpass expectations, with projections aligning closely with the subdued anticipation from the investment community. The firm's valuation of ServiceNow stands at approximately 36 times the enterprise value to calendar year 2025 estimated free cash flow (EV/CY25E FCF), reinforcing the Buy rating.
The analyst's commentary highlighted the mixed results from the commercial partner survey, which did not show a marked change from the previous quarter. However, the anticipation of a modest earnings beat is supported by positive signals from the federal sector and the company's robust sales pipeline.
Furthermore, the management's bullish stance this quarter, alongside evidence pointing toward accelerated growth for the second half of the year, provides a solid foundation for the firm's optimistic outlook on the stock. These factors collectively underpin TD Cowen's decision to reiterate its Buy rating on ServiceNow shares.
Investors and stakeholders in ServiceNow are looking forward to the second-quarter earnings report, which will offer a clearer picture of the company's financial health and growth trajectory. The firm's analysis suggests that ServiceNow is positioned to meet or exceed current market expectations, despite a backdrop of mixed commercial partner feedback.
In other recent news, the first quarter of 2024 witnessed mixed revenue growth among tech giants Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and ServiceNow, as reported by CMB International. Despite a slight decline in Software as a Service (SaaS), advertising and cloud services saw a reacceleration.
Amazon's margin expansion and Microsoft's potential profitability through AI initiatives were highlighted, while ServiceNow is expected to maintain steady growth.
CMB International maintains a 'BUY' rating on these stocks, anticipating continued growth. Analyst firms Needham, TD Cowen, and Oppenheimer also maintained positive ratings on ServiceNow, attributing its resilience to its workflow automation platform. ServiceNow has further integrated AI-powered features for talent development and workplace collaboration, and announced an enhanced partnership with Microsoft.
In other recent developments, DNOW Inc. reported Q1 earnings and revenue that fell short of expectations, with an adjusted EPS of $0.21 and revenue of $563 million. Despite this, DNOW Inc. upgraded its full-year outlook for 2024, citing robust free cash flow and a successful acquisition. These recent developments are based on various factors, including market conditions and internal strategies, and are subject to change.
InvestingPro Insights
As ServiceNow (NYSE: NOW) prepares for its second-quarter earnings report, investors are closely monitoring its performance metrics. According to the latest data from InvestingPro, ServiceNow boasts an impressive gross profit margin of 78.87% for the last twelve months as of Q1 2024, highlighting its strong ability to manage costs relative to revenue. Moreover, the company has experienced a robust revenue growth of 24.4% during the same period, indicating a solid expansion in its financial top line.
InvestingPro Tips suggest that ServiceNow is trading at a high earnings multiple, with a P/E ratio of 81.33, which may be justified by its near-term earnings growth prospects. Moreover, analysts predict the company will be profitable this year, which is confirmed by its profitability over the last twelve months. ServiceNow's position as a prominent player in the Software industry, combined with its capacity to generate cash flows that can sufficiently cover interest payments, offers a compelling case for potential investors.
For those considering an investment in ServiceNow, it's worth noting that there are additional InvestingPro Tips available to help make an informed decision. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking access to comprehensive analysis and insights. With the next earnings date on July 24, these insights could be particularly valuable in assessing the company's future performance.
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