ServiceNow Shares Plunge Despite Strong Q4 Earnings Report
Written by Emily J. Thompson, Senior Investment Analyst
Source: Fool
- Earnings Beat: ServiceNow reported Q4 revenue of $3.57 billion, a 21% year-over-year increase that surpassed analyst expectations of $3.53 billion, with adjusted EPS at $0.92, reflecting a 24% growth and showcasing the company's robust market performance.
- Revenue Assurance: The company's remaining performance obligation (RPO) rose 27% to $28.2 billion, with the current portion increasing 25% to $12.85 billion, providing a solid revenue foundation for the next four quarters, although market reactions were unexpectedly negative.
- Acquisition Risks: Following its $2.85 billion acquisition of Moveworks, ServiceNow announced plans to acquire cybersecurity startup Armis for $7.75 billion, which, while enhancing its AI capabilities, introduces risks related to integration challenges and potential talent loss.
- Cautious Market Reaction: Despite guiding for a 21% growth in full-year subscription revenue, the organic growth rate, adjusted for acquisitions and currency effects, is only 19%, falling below the critical 20% threshold that investors watch closely, leading to a significant drop in stock price.
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Analyst Views on NOW
Wall Street analysts forecast NOW stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for NOW is 222.81 USD with a low forecast of 172.00 USD and a high forecast of 263.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
32 Analyst Rating
30 Buy
2 Hold
0 Sell
Strong Buy
Current: 129.620
Low
172.00
Averages
222.81
High
263.00
Current: 129.620
Low
172.00
Averages
222.81
High
263.00
About NOW
ServiceNow, Inc. provides an artificial intelligence (AI) platform for business transformation. The Company’s AI platform connects people, processes, data, and devices to increase productivity and maximize business outcomes. Its intelligent platform, the Now Platform, is a cloud-based solution that helps enterprises and organizations across public and private sectors digitize workflows. The workflow applications built on the Now Platform are organized into four primary areas: Technology, CRM and Industry, Core Business and Creator. Its products include IT Service Management, IT Operations Management, HR Service Delivery, ServiceNow AI Agents, AI Experience, Build Agent, ServiceNow AI Control Tower, AI Agent Fabric, RaptorDB, Workflow Data Fabric, Workplace Service Delivery, ServiceNow Platform Encryption, Telecommunications Service Operations Management, and others. The Company also offers identity security, helping organizations secure access across the enterprise.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
SERVICENOW STOCK FALLS 11% FOLLOWING Q4 EARNINGS REPORT
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- Impact of Q4 Results: The decline in share value reflects investor reactions to the company's financial performance in the fourth quarter.
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