ServiceNow’s (NOW) stock performance has easily outperformed the broader markets. The stock has risen 50.8% in 2019. The stock has generated almost 4x returns in the last three years. ServiceNow stock has risen almost 5x in the last five years.
So, what does this mean for investors? Does ServiceNow stock have more upside potential or is it due for a correction? While ServiceNow’s sales have risen 44.0% in the last five years, analysts expect it to rise 29.0% in the next three years.
ServiceNow’s sales growth continues to be strong, although it’s slowing. The company’s renewal rate is high at 98.0%. ServiceNow has a customer base of 5,400. The company’s subscription sales rose 40.0% in the first quarter.
ServiceNow stock has a forward PE ratio of 62.9x. Analysts expect the company’s earnings to expand 27.7% in 2019, 34.3% in 2020, and 32.3% annually in the next five years. ServiceNow stock seems grossly overvalued at the current prices. The stock might lose significant value if there’s an earnings miss.
ServiceNow is a solid pick in the long term. Investors need to watch every time the stock loses substantial value.
Analysts’ target price
Among the 34 analysts tracking ServiceNow, 30 recommended a “buy” and four recommended a “hold.” There weren’t any “sell” recommendations. Analysts have a 12-month average target price of $287.29, which indicates that the stock is trading at a discount of 7.0% to the average estimate.