Analysts Adjust Price Targets for ServiceNow Ahead of Earnings

ServiceNow (NOW) approaches its second-quarter earnings report with two Wall Street firms raising their price targets for the stock, despite a recent downturn linked to IBM's disappointing pre-announcement.

Price Target Adjustments

BNP Paribas has set a target price of $140 for ServiceNow, maintaining an Outperform rating. Analyst Stefan Slowinski believes that the recent decline triggered by IBM presents a buying opportunity, particularly as ServiceNow's expanding cybersecurity capabilities align with market needs.

RBC Capital also increased its price forecast from $121 to $130, indicating confidence in ServiceNow's performance. Both firms noted positive findings from recent channel checks, with ServiceNow returning to the top of BNP's reseller survey.

Business Outlook and Growth Potential

ServiceNow's fiscal year 2026 guidance suggests subscription revenue growth between 20.5% and 21%, which Slowinski considers conservative. He anticipates upward adjustments in guidance as the company expects to close previously delayed on-premise deals.

For the second quarter, ServiceNow has projected subscription revenue growth of 21% to 21.5%, with M&A activity expected to contribute approximately 225 basis points. Slowinski cautions that the projected impact of the Armis acquisition on revenue might be underestimated, potentially leading to stronger-than-expected topline results.

Moreover, Slowinski's analysis indicates that ServiceNow's federal business may experience a turnaround, as the company faces easier comparisons from last year's performance impacted by external factors like the government shutdown. The firm is optimistic that this sector could become a tailwind for growth.

Despite the optimistic outlook, RBC flagged a potential concern regarding variability in CIO and CTO spending, described as influenced by what they termed "Mythos urgency." Still, the overall sentiment remains positive, supported by recent observation tours in the Bay Area.

This article is for informational purposes only and does not constitute financial advice.