1 Wall Street Firm Thinks Servicenow Stock Is Going To $885. Is It A Buy?
Workplace software specialist ServiceNow (NYSE: NOW) is riding a strong tailwind of companies looking to digitize employee workflow. The stock is up 65% over the past year, but at recent prices it's 11% off its 52-week high of $815. This is a great buying opportunity, according to analysts at Baird.
The analysts came away from the company's recent analyst day with more confidence in its ability to capture a sizable addressable market. The firm reiterated an outperform (buy) rating on the shares and raised the price target from $870 to $885, implying a new high for the stock within the next year or so.
Why buy ServiceNow stock
ServiceNow reported a solid start to the year. In the first quarter, subscription revenue grew 25% year over year to $2.5 billion. CEO Bill McDermott credited the company's advantage in being first to market in digital workflows and investment to add more capabilities to its Now platform, including the Now Assist feature powered by artificial intelligence.
ServiceNow has experienced a small acceleration in top-line growth over the last year. Management sees annual subscription revenue reaching more than $15 billion by 2026.
Moreover, ServiceNow continues to grow free cash flow, now over $3 billion on a trailing-12-month basis. The company's consistent free cash flow growth along with strong top-line momentum could send the shares to new highs this year.
The analyst's price target is about 23% higher than Wednesday's closing price of $721.03. Assuming the company delivers on its guidance for approximately 22% subscription revenue growth, the share price could reach the $885 price target within the next year.
Should you invest $1,000 in ServiceNow right now?
Before you buy stock in ServiceNow, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ServiceNow wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $554,830!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of May 6, 2024
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ServiceNow. The Motley Fool has a disclosure policy.
