Brokerage Benchmark has initiated coverage on ServiceNow (NOW.US) with a "Buy" rating and a price target of $125. This target implies an approximate 20% upside from the stock's closing price of $104.04 on Wednesday. Analyst Yi Fu Lee stated, "We are initiating coverage on ServiceNow with a 'Buy' rating and a $125 price target, based on its cloud architecture platform that enables the seamless integration of artificial intelligence (AI), data, security, and automated workflows, unlocking the potential for efficient enterprise collaboration through digital transformation. We believe the market's punishment of ServiceNow lacks a reasonable basis. The stock has declined about 45% from its January 2025 peak, likely driven by market concerns over the impact of AI/generative AI (GenAI) and last year's series of acquisition-related expenditure expansions. We view ServiceNow as a beneficiary of the Agentic AI super-cycle and believe patient investors should use this market sell-off to gradually increase their holdings in this high-quality, highly profitable growth SaaS company." The analyst believes that as AI tokens transition from pilot phases into daily, mission-critical workflows or operational processes, ServiceNow's trusted platform will gain upside revenue potential. The analyst added that ServiceNow's success factors stem from its flexible, open architecture, which enables cloud neutrality and supports large language models (LLMs), diverse data sources, and extensive system integration capabilities. The analyst stated, "We see a symbiotic relationship between AI/frontier LLM providers and ServiceNow; both sides need each other to enhance the likelihood of mutual success. ServiceNow has built an astute 'universal mousetrap,' allowing the company to benefit whether clients build systems on other platforms and manage security via ServiceNow's AI Control Tower or directly adopt its IT service platform." The analyst further noted that the selling prompted by unfounded fears about AI/generative AI impact has created an attractive entry point. The analyst believes ServiceNow has strategically positioned itself as a trusted operational platform for handling workflows of global organizations and can collaborate with leading AI/frontier LLM providers to securely deploy AI agents worldwide. Furthermore, the analyst indicated that a busy 2025 merger and acquisition schedule is strengthening ServiceNow's technology roadmap and expanding its total addressable market (TAM). The analyst said, "The acquisitions of Armis/Veza strengthen its security posture, the acquisition of Moveworks enhances AI assistant and search capabilities, and the acquisition of Logik.io complements its configure, price, quote (CPQ) platform capabilities. We believe ServiceNow is largely prepared in the cybersecurity segment of its portfolio and may continue with complementary acquisitions to enhance its breadth in talent, technology, and TAM expansion, pushing its potential market size beyond $600 billion." The analyst also expressed confidence in ServiceNow CEO Bill McDermott and his leadership team.
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