ServiceNow (NOW) AI Stock Analysis

• Market Cap: $191.53B
• Dividend Yield: N/A
• Average Volume (3M): 1.82M
• Price to Earnings (P/E): 133.1
• Beta (1Y): 1.43
• Revenue Growth: 22.44%
• EPS Growth: -18.31%
• Country: US
• Employees: 26,293
• Sector: Technology
• Sector Strength: 48
• Industry: Software
• EPS (TTM): 6.84
• Shares Outstanding: 206,000,000
• 10 Day Avg. Volume: 1,716,376
• 30 Day Avg. Volume: 1,818,166
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 17.44
• Price to Cash Flow (P/CF): 29.30
• P/FCF Ratio: 34.90
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $1,192.24
• Price Target Upside: 31.58% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 32

ServiceNow shows strong financial performance with significant growth and profitability, supported by strategic investments in AI and partnerships. However, the high P/E ratio suggests a rich valuation, posing risks if growth expectations are not met. Technical indicators show bearish momentum, which could present a short-term challenge. Overall, while the long-term outlook is positive, caution is advised due to current market conditions.

Positive Factors

AI Integration

ServiceNow leverages AI to significantly improve its own efficiency, saving 400,000 labour hours in customer service use cases.

Government Contracts

The Defense Logistics Agency has significantly reduced its IT vendor count by standardizing on NOW's platform, showcasing potential efficiency gains.

Negative Factors

Growth Rate Concerns

NOW's ITOM business had a notable step down in growth rate in 4Q, marking the first <20% growth in 8 quarters.

ServiceNow Business Overview & Revenue Model

Company Description

Founded in 2004 and based in California, ServiceNow, Inc. is a software company which provides enterprise cloud computing solutions to help companies manage digital workflows for enterprise operations. The company offers its solutions to various sectors including healthcare, education, oil and gas, telecommunications, government, consumer products, technology, IT and financial services.

How the Company Makes Money

ServiceNow generates revenue primarily through the sale of subscription-based licenses for its cloud-based platform and related applications. This subscription model provides a steady and predictable revenue stream as customers pay ongoing fees to access the platform's various services. Additionally, ServiceNow offers professional services, including consulting, implementation, and training, which contribute to its revenue. The company also forms strategic partnerships and alliances with other technology firms, which can enhance its product offerings and expand its market reach, thereby supporting its revenue growth. ServiceNow's focus on continuous innovation and expanding its product suites allows it to cater to a broad range of business needs, encouraging customer retention and attracting new clients, further boosting its revenue.

ServiceNow Financial Statement Overview

Summary

ServiceNow demonstrates strong financial performance with consistent revenue growth, high gross profit margin, and a solid balance sheet. The cash flow position is robust, though there is room for improvement in EBIT margins.

Income Statement

ServiceNow has demonstrated strong revenue growth, with a consistent upward trend over the years. The gross profit margin remains high at approximately 79.2%, reflecting efficient cost management and pricing power. The net profit margin of 13% indicates solid profitability. However, the EBIT margin of 12.4% suggests potential room for operational efficiency improvements. Overall, the company shows robust financial health, supported by consistent revenue growth and strong profitability metrics.

Balance Sheet

The balance sheet reflects a healthy financial position with a low debt-to-equity ratio of 0.08, indicating conservative use of leverage. The return on equity stands at 14.8%, showcasing effective utilization of shareholders' funds. With an equity ratio of 47.1%, the company maintains a balanced capital structure, providing stability. The cash reserves and short-term investments are substantial, enhancing liquidity.

Cash Flow

ServiceNow's cash flow statement reveals a strong operating cash flow to net income ratio of 2.99, signifying efficient cash generation from operations. The free cash flow growth rate is impressive, highlighting the company's ability to reinvest and sustain growth. However, the free cash flow to net income ratio of 2.40 suggests some variability, potentially due to capital expenditures. Overall, the cash flow metrics indicate robust cash-generating capabilities and prudent financial management.

Breakdown
TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
6.60B	10.98B	8.97B	7.25B	5.90B	4.52B
	Gross Profit
5.12B	8.70B	7.05B	5.67B	4.54B	3.53B
	EBIT
218.00M	1.36B	762.00M	355.00M	257.00M	198.86M
	EBITDA
606.00M	2.33B	1.59B	768.00M	257.00M	452.93M
	Net Income Common Stockholders
184.00M	1.43B	1.73B	325.00M	230.00M	119.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
5.76B	5.76B	4.88B	4.28B	3.30B	3.09B
	Total Assets
20.38B	20.38B	17.39B	13.30B	10.80B	8.72B
	Total Debt
789.00M	789.00M	2.28B	2.23B	2.21B	2.14B
	Net Debt
-1.51B	-1.51B	387.00M	762.00M	486.00M	458.37M
	Total Liabilities
10.77B	10.77B	9.76B	8.27B	7.10B	5.88B
	Stockholders Equity
9.61B	9.61B	7.63B	5.03B	3.69B	2.83B
Cash Flow		Free Cash Flow
2.02B	3.42B	2.70B	2.17B	1.79B	1.35B
	Operating Cash Flow
2.46B	4.27B	3.40B	2.72B	2.19B	1.79B
	Investing Cash Flow
-1.64B	-2.50B	-2.17B	-2.58B	-1.61B	-1.51B
	Financing Cash Flow
-462.00M	-1.34B	-803.00M	-344.00M	-506.00M	596.65M

ServiceNow Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 906.09
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NOW, the sentiment is Negative. The current price of 906.09 is below the 20-day moving average (MA) of 970.41, below the 50-day MA of 1033.76, and below the 200-day MA of 910.11, indicating a bearish trend. The MACD of -37.34 indicates Positive momentum. The RSI at 31.05 is Neutral, neither overbought nor oversold. The STOCH value of 23.28 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for NOW.

ServiceNow Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSFT	81 Outperform	$2.89T	31.30	30.64%	0.81%	15.04%	12.38%
WDAY	79 Outperform	$70.05B	130.07	5.82%	―	17.04%	-62.24%
ADBE	78 Outperform	$193.98B	35.94	39.42%	―	11.02%	4.96%
ORCL	75 Outperform	$440.44B	38.54	132.00%	0.99%	6.40%	12.83%
CRM	73 Outperform	$274.98B	45.18	10.13%	0.55%	8.72%	51.47%
NOW	71 Outperform	$191.53B	133.08	14.83%	―	22.44%	-18.31%
Sector *	59 Neutral	$22.39B	11.53	-18.05%	2.31%	5.00%	-25.89%

ServiceNow Corporate Events

ServiceNow Implements New Executive Severance Policy

ServiceNow has amended its executive employment agreements to include a new Executive Severance Policy aimed at standardizing severance payments and benefits for its leadership team, effective January 1, 2025. This policy impacts the compensation structure for executives, particularly in scenarios involving a qualifying termination or a change in control, potentially affecting the company’s operational stability and stakeholder confidence.