Ahead of its October 25th third-quarter report, analysts at investment firm Baird have predicted “strong” results from cloud computing company ServiceNow (NYSE:NOW), expecting a considerable boom in its revenue. Analyst Rob Oliver, who has an Overweight Rating on ServiceNow, told investors to expect figures close to the company’s guidance.
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The analyst based his judgment on an assessment of sentiment around the company and demand trends. Oliver also cited the company’s recent record of being “prudent” and the significant support it received from the federal government as reasons for the high expectations.
Furthermore, the analyst said the firm’s foray into generative artificial intelligence captures its long-term plans. “As showcased during NOW’s analyst day, we believe NOW continues to invest in building out GenAI offerings and expects pricing to be a net tailwind to growth,” Oliver wrote.
In terms of numbers, Oliver projects third-quarter subscription revenue to be between $2.185B and $2.195B. He also expects an EBIT margin of around 27% and current performance obligations to rise about 25.5% year-over-year.
Oliver expects the surge in subscriptions to grow beyond this year, predicting $10.4 billion in subscription revenue in 2024 with a 28% operating margin and a 31% free cash flow margin. He also made projections for 2025 and 2026, which include a 31% free cash flow margin and increases in operating margin and subscription revenue.
What is the Target Price for NOW Stock?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NOW stock based on 20 Buys assigned in the past three months, as indicated by the graphic above. Furthermore, the average NOW price target of $648.25 per share implies 16.85% upside potential.
