Of the 34 analysts tracking ServiceNow (NOW), 30 have recommended “buys,” four have recommended “holds,” and none have recommended “sells” on the stock. Analysts have a 12-month average target price of $287.29 on the stock, which indicates a potential upside of just 0.54% from its current price.
It’s understandable that analysts expect ServiceNow stock to be flat in the next 12 months considering its stellar run in 2019.
Is ServiceNow stock overvalued?
NOW is trading at a forward PE multiple of 67.0x. This multiple seems a tad expensive considering the company’s expected earnings growth rate going forward. NOW’s earnings are expected to rise 27.7% in fiscal 2019, 34.3% in fiscal 2020, and 32.3% in the next five years.
High-growth companies generally have higher valuations, but ServiceNow will have to keep beating Wall Street’s estimates for its stock to rise. An earnings or revenue miss or weak guidance could drive its stock down significantly.
Huge market opportunity
ServiceNow has estimated its total addressable market to be $60 billion, which means that the company can further grow its revenue if it gains market share. The key revenue drivers for ServiceNow and its business model have resulted in an impressive retention rate as well as recurring sales.
ServiceNow remains popular among investors—and for good reason.