ServiceNow Has Fallen 45%, Wall Street Says Buy Now

Benchmark analyst Yi Fu Lee initiated coverage of ServiceNow (NYSE:NOW | NOW Price Prediction) with a Buy rating and a $125 price target, arguing that a prolonged selloff has created a compelling entry point for long-term investors. ServiceNow stock has fallen -50.42% from its January 2, 2025 price of $210.87 to a recent $104.55, well below its 52-week high of $211.48. The thesis: the selloff has disconnected price from fundamentals at a moment when the company’s AI monetization is accelerating.

The Analyst’s Case

Benchmark sees ServiceNow as well positioned to benefit from the Agentic AI supercycle, with the platform’s integration of AI, data, security, and automated workflows creating durable enterprise value. The firm points to strong leadership under CEO Bill McDermott as a key pillar supporting long-term profitable growth. McDermott himself extended his commitment to the company through 2030, and on the Q4 earnings call declared: “This is a $1 trillion company in the making. I can’t fathom a better entry point for what ServiceNow is building.”

The underlying numbers support the conviction. In Q4 FY2025, Now Assist net new ACV more than doubled year-over-year, and 244 transactions exceeded $1M in net new ACV, representing nearly 40% YoY growth. Full-year free cash flow reached $4.576 billion, up 34% year-over-year.

Company Snapshot

ServiceNow is an enterprise cloud platform that automates digital workflows across IT, security, HR, and customer operations. The company closed FY2025 with $13.278 billion in revenue, up 21% year-over-year, and guided for $15.53 billion to $15.57 billion in subscription revenue for 2026. Current remaining performance obligations stood at $12.85 billion, up 25% year-over-year, providing strong forward revenue visibility. The company counts over 8,800 customers and maintains a 98% renewal rate.

Why the Move Matters Now

The stock trades at a trailing P/E of 63x and a forward P/E of 25x, a significant compression from recent highs. The broader Wall Street consensus remains firmly constructive: 42 analysts rate the stock Buy, 3 Hold, and 1 Sell, with a consensus price target of $188.67. Benchmark’s $125 target sits well below that consensus, reflecting a conservative entry-level thesis rather than a full recovery call. The company’s $5 billion share repurchase authorization, including a planned $2 billion accelerated repurchase, adds a capital return dimension that could support the stock at current levels.

What the Initiation Signals

For long-term investors, Benchmark’s initiation reflects a view that price has disconnected from fundamentals in a structurally growing enterprise AI platform. Risks remain real: federal budget tightening is impacting deal timing, non-GAAP subscription gross margin declined to 83% from 85% year-over-year, and pending acquisitions of Armis and Veza introduce integration complexity. Investors should weigh those headwinds against a platform guiding for 32% non-GAAP operating margin and 36% free cash flow margin in 2026. The Benchmark initiation adds a Buy voice to an already bullish analyst community, but the $125 target signals this is a patient, fundamentals-first call rather than a near-term momentum trade.