ServiceNow ‘s meltdown this week has opened up an attractive entry point for investors, according to Bernstein. In a Wednesday note, the bank reiterated its outperform rating and called ServiceNow “the ‘cheapest’ large cap software stock,” a title that analyst Peter Weed said he didn’t think he’d ever grant for a business he’d previously labeled as “the next Microsoft .” Weed’s price target of $1,093 is approximately 40% above ServiceNow’s Tuesday close of $781.12. Shares of ServiceNow have slumped 25% this year. The stock has fallen 8% this week alone, after Bloomberg reported over the weekend that ServiceNow is in talks to acquire cybersecurity startup Armis in a potential $7 billion deal. NOW YTD mountain NOW YTD chart “Yesterday we defended the potential Armis M & A that sent the stock down ~11%. Today we are reflecting on how cheap the stock is — ServiceNow’s Price to 3-year-out [free cash flow] vs. growth rate is now below the most bearish AI-narrative impacted large cap application software peers like Adobe . On this same basis, it is even trading below the reputation maligned- Salesforce that ServiceNow bears are comparing it to,” Weed wrote. The analyst added that he doesn’t see organic growth guide downs on the horizon, like in mid-2022. In fact, ServiceNow’s management emphasized accelerating demand in a recent meeting. Meanwhile, Weed also believes that recent “big deals” don’t reflect a lack of restraint on ServiceNow’s part. “While large, recent deals appear ‘normal’ and not signals of tech-disconnected inorganic growth-at-all-costs,” he wrote. For instance, Weed defended the company’s acquisition of Moveworks earlier this year as a move that seems aligned with its overall strategy . Moveworks, alongside Armis, already appear tightly integrated with ServiceNow’s architecture, he wrote. “They seem to require limited technical change beyond UI and branding to be a seamless part of the platform — part of what makes them attractive targets,” the analyst said. “And there is a clear line of sight to sell them at scale to ServiceNow’s broad customer base, driving rapid growth in their revenue.”
