ServiceNow (NOW): Evaluating Valuation After Launching Its AI Experience Platform and Generative AI Monetization Strategy

ServiceNow (NOW) recently rolled out its AI Experience platform, drawing attention for how it unifies people and AI within enterprise workflows. The launch underscores momentum as the company accelerates monetization of generative AI solutions.

See our latest analysis for ServiceNow.

Recent industry conferences and well-received product launches have ServiceNow back in the spotlight, even as tech stocks are facing mixed sentiment. Despite some choppiness in the broader software sector, the company’s 1-year total shareholder return of -2.2% masks robust long-term momentum, with an impressive 165% three-year total return. Investors seem to be weighing short-term volatility against ServiceNow’s ongoing AI-driven transformation and strong track record of growth and execution.

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With shares down this year but analysts raising targets and bullish on AI momentum, the big question is whether ServiceNow is trading at a bargain, or if the market is already reflecting its future growth potential.

Most Popular Narrative: 19% Undervalued

ServiceNow’s most widely-followed narrative points to a fair value that significantly outpaces its recent closing price. This highlights the gap between the company’s momentum and where consensus believes it should trade, setting the stage for a deeper dive into the fundamental story behind the valuation.

ServiceNow's focus on AI platform and business transformation is gaining momentum, which is expected to drive future revenue growth as demand for AI-driven solutions increases. The acquisition of companies like Moveworks and Logik.ai can enhance ServiceNow’s offerings, potentially improving net margins by driving efficiencies and offering more integrated solutions.

Read the complete narrative.

Want to unlock why analysts are making such bold calls on ServiceNow? There is one pivotal financial assumption and a dramatic margin shift in play. Will these sky-high expectations become reality? Dive in for the full narrative that reveals what’s fueling this premium view.

Result: Fair Value of $1,142.59 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained reliance on federal contracts and rising integration risks from recent acquisitions could challenge ServiceNow’s strong growth expectations going forward.

Find out about the key risks to this ServiceNow narrative.

Another View: What If The Market’s Right?

Switching to a market multiple lens, ServiceNow looks pricey relative to peers. Its price-to-earnings ratio stands at 115.4x, far above the software industry’s 34.8x, the peer average of 63.9x, and the fair ratio of 50x estimated by regression analysis. That gap could mean real risk if the market turns. Could momentum alone justify such lofty expectations?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own ServiceNow Narrative

If you want to dig into the numbers yourself or shape your own view, it only takes a few minutes to build your own story from the ground up. Do it your way

A great starting point for your ServiceNow research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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