ServiceNow (NOW): Evaluating Valuation After Recent Shifts in Investor Sentiment

ServiceNow (NOW) shares have been moving in line with broader market trends, catching some attention as investors reevaluate the company’s recent performance. The stock’s recent price action comes against a backdrop of ongoing digital transformation trends in enterprise software.

See our latest analysis for ServiceNow.

Despite a brief uptick, ServiceNow’s share price has lost ground over the past month and year, reflecting shifting investor sentiment around growth software stocks. While momentum has faded recently, the company’s long-term total shareholder return still stands out due to its impressive expansion over the past three years.

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With ServiceNow’s shares trading well below recent analyst price targets despite robust revenue and profit growth, the question for investors now is clear: does this present untapped upside, or has the market already factored in future gains?

Most Popular Narrative: 28.8% Undervalued

With ServiceNow’s most followed narrative highlighting fair value as being far above the recent $822 close, investor focus is turning to how sustainable these premium expectations may be. The stage is set to explore the biggest drivers behind this optimistic outlook.

*ServiceNow's AI focus and strategic acquisitions are positioned to drive revenue growth and enhance net margins through integrated, efficient solutions. Expansion into CRM, industry workflows, and the public sector positions ServiceNow for significant future growth and revenue stability.*

Read the complete narrative.

Want to know the growth blueprint behind this high valuation? The explanation lies in aggressive profit expansion and bold diversification into new verticals. How much can margins stretch with transformative technology involved? Click through to discover the drivers and quantitative factors underpinning this standout price target.

Result: Fair Value of $1,154.54 (UNDERVALUED)

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

However, risks remain, such as reliance on U.S. federal contracts and the challenges of integrating new AI-driven acquisitions, which could temper ServiceNow’s growth outlook.

Find out about the key risks to this ServiceNow narrative.

Another View: Market Ratios Tell a Different Story

While many see upside based on earnings projections, the current price-to-earnings ratio of 98.5x is far higher than both the US Software industry average of 32x and the peer group’s 53.9x. The fair ratio is even lower at 46.3x. This wide gap suggests investors are paying a large premium for growth. Will future results justify it, or is there valuation risk ahead?

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

Build Your Own ServiceNow Narrative

If you prefer hands-on analysis or want to approach the data with your own perspective, you can easily craft your own view in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding ServiceNow.

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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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