ServiceNow (NOW): Examining Valuation After Recent Share Price Decline

ServiceNow (NOW) shares have been trending lower, with a drop of nearly 15% over the past month and more than 23% since the start of the year. Investors are watching closely for signs of stabilization as broader market shifts continue.

See our latest analysis for ServiceNow.

This past year has been tough for ServiceNow shareholders, with turbulence in the tech sector contributing to a -24.08% year-to-date share price return and a -23.55% total shareholder return over the last twelve months. The recent slide suggests momentum is fading for now, even though the company delivered impressive multi-year gains earlier in the decade.

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With ServiceNow’s strong financial growth but a steep recent pullback, investors are left wondering if the current price is a bargain for long-term growth or if the market is already accounting for all the company’s future potential.

Most Popular Narrative: 30.7% Undervalued

ServiceNow’s current share price of $800.46 sits well below the narrative’s fair value estimate, suggesting significant upside if projections hold true. Strong growth catalysts and ambitious expansion plans underpin this prevailing market viewpoint.

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.

What is the secret sauce fueling this bullish narrative? It all hinges on bold forecasts for rapid profit growth and aggressive margin expansion, powered by next-generation technology bets. Curious about the financial leaps analysts are baking in? Unlock the full narrative and catch the hidden drivers behind that sky-high valuation.

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

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

However, changes in U.S. federal spending or increased competition in AI could quickly undermine ServiceNow’s growth prospects and current analyst optimism.

Find out about the key risks to this ServiceNow narrative.

Another View: Multiples Raise Concerns

While the narrative suggests ServiceNow may be deeply undervalued, a look at the price-to-earnings multiple tells a different story. The company trades at 95.9x earnings, far above the US Software industry average of 29.2x and a fair ratio estimate of 49.6x. This big gap raises important questions about whether the market is pricing in too much future growth, or if investors are simply paying any price for a piece of the action. Which valuation approach feels closer to reality?

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

Build Your Own ServiceNow Narrative

If you feel another perspective fits ServiceNow better or want to dig into the data firsthand, you can easily shape your own story in just a few minutes. Do it your way

A great starting point for your ServiceNow research is our analysis highlighting 4 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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