ServiceNow has received a Buy rating from an analyst who sees the stock trading at attractive valuations despite strong growth. The company's subscription revenue is growing at 21%, it maintains a 97% renewal rate, and its AI offering—Now Assist—has more than doubled in average contract value while multi-product deals surged 70% year over year. The analyst's fair value estimate is $143 per share, suggesting room for appreciation.
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An analyst initiated a Buy rating on ServiceNow, citing the stock's valuation at 26x forward earnings (near decade lows), 21% subscription revenue growth guidance, and 97% renewal rate. Now Assist average contract value more than doubled, and 3+ product deals grew 70% year over year.
Why it matters
ServiceNow is compounding north of 20% while trading at a multiple the analyst views as attractive. The acceleration in AI monetization—particularly through Now Assist and multi-product deals—suggests the company is successfully converting AI capabilities into revenue, addressing investor concerns about whether AI is a threat or opportunity for enterprise software vendors.
What to watch
The analyst's base case DCF yields a fair value of $143 per share, with additional upside if the stock's multiple recovers from current levels.
The analyst has initiated a Buy rating on ServiceNow based on valuation, growth trajectory, and brand strength. The stock trades at 26x forward earnings—near decade lows—while the company guides to 21% subscription revenue growth and maintains a 97% customer renewal rate. These figures suggest a maturing but still-compounding business that has retained strong customer stickiness despite competitive pressures and broader market skepticism about software valuations. Most significantly, AI monetization is accelerating. Now Assist, the company's AI product, has seen its average contract value more than double. Furthermore, deals involving three or more ServiceNow products grew 70% year over year, signaling that customers are adopting AI-powered capabilities across multiple workloads and expanding their relationship with the vendor. The analyst's discounted cash flow model yields a fair value of $143 per share, implying upside from current levels. The analyst also notes optionality from any multiple recovery—if ServiceNow's valuation re-rates higher as investor confidence in software durability increases, further gains would accrue.
The analyst's Buy initiation rests on three overlapping signals. First, ServiceNow's valuation at 26x forward earnings is near decade lows, suggesting the market has priced in more pessimism than the fundamentals warrant. Second, the company's subscription revenue growth of 21% and 97% renewal rate indicate a business model still compounding robustly—well above mature software peers. Third, and most critically for 2024–2025 investor sentiment, the acceleration in Now Assist revenue and the 70% year-over-year growth in multi-product deals demonstrate that the company is monetizing AI capabilities rather than being disrupted by them. This addresses a key investor concern: whether generative AI would cannibalize traditional enterprise software revenue or create new incremental revenue streams.
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