ServiceNow Targets New Highs With AI and Automation

Key Points

• ServiceNow stock is up triple digits in two years and can rise another 20% in 2025 at least.
• Analysts are lifting their price targets, citing an ability to sustain 20% growth despite its large size.
• Highlights from 2024 include healthy cash flow, debt reduction, and increasing shareholder equity. 

Up 60% from the low in late 2024 and 200% since 2022, ServiceNow’s NYSE: NOW stock price has at least another 20% to run. The growth is slowing in 2024 but still strong in the low 20% range and is expected to stay that way for the next three to five years, providing ample cash flow to drive shareholder value.

The takeaway from analysts' chatter is that this company has enormous growth potential at scale and an industry-leading ability to monetize AI by driving adoption. The adoption of AI services is in its earliest phases and gaining momentum due to expanding use cases and penetration. It is a trend that has decades to play out. ServiceNow is well-positioned to benefit from that trend because its end-to-end solutions are adaptable across industry verticals. 

Analysts Raise Price Targets Ahead of ServiceNow Q4 Release

The bullish analyst trends of 2024 continued in the first two weeks of 2025. MarketBeat tracked several revisions in the first two weeks of January, all of which increased the price target. The consensus of the 29 analysts tracked by MarketBeat is that this stock is a Moderate Buy, and there is growing conviction it will set a new high this year. 

The fresh targets imply a move to $1300 is possible, a gain of nearly 25% from the early-January lows, and there are noteworthy mentions from firms like Wells Fargo, Raymond James, and JPMorgan Chase & Company. They all have the stock on critical watchlists. Wells Fargo is tracking it for above-average growth, while JPMorgan Chase has the stock on its Analyst Focus List for value. 

The guidance at the end of Q3 caused the analysts to dial back their estimates for Q4, but the outlook remains robust. The company’s guidance is for nearly 22% year-over-year growth driven by increasing client count, the growth of large clients, and service penetration. The critical details will include RPO growth, which exceeded 26% in Q3. Slowing RPO growth is a sign that ServiceNow’s revenue growth may decelerate further, so the market will want to see this number hold steady if it does not grow. 

Institutions Support the Price Action in ServiceNow Stock

The institutional activity aligns with the 2024 uptrend in ServiceNow stock. The group owns over 85% of the stock and bought it on balance every quarter in 2024, with activity ramping sequentially. Buyers, including fund managers and private and public investment capital, provide a strong support base. However, their activity raised concerns in the year's first two weeks, with net sales reported. If this trend continues, the late 2024 peak could mark the high-water point for this market.

Aside from growth, analysts and institutions are interested in ServiceNow's balance sheet. The company’s growth supports a growing and improving cash flow, which it uses to strengthen the balance sheet and drive shareholder value. The balance sheet is a fortress with net cash, ultra-low leverage, and declining liabilities. Total liability fell more than 6% in Q3 while assets rose, leaving shareholder equity up nearly 22% year over year. Similar improvements are expected in 2025, and longer-term forecasts include accelerated share buybacks and the potential for dividend distributions. 

The Technical Outlook: ServiceNow Pulls Back From A Peak, Uptrend Intact

ServiceNow’s stock price pulled back from a peak in late 2024 and may struggle to find traction in early 2025, but the uptrend is intact. The critical support is near $950 but is unlikely to be reached, given the strength of the uptrend leading up to the peak. Indicators, including convergent and extreme MACD readings, suggest market strength is building and that new highs will be set this year. The risk is that the market rebounds from the pullback but tops out at the current highs, entering a trading range it may have trouble exiting.