ServiceNow (NOW) Downgraded Due to Limited Upside Potential

ServiceNow, Inc. (NYSE:NOW) is one of the AI Stocks Everyone Is Watching Closely. On July 23, Erste Group analyst Stephan Lingnau downgraded the stock to “Hold” from Buy due to limited upside potential for the stock.

The analyst told investors in a research note that ServiceNow’s growth momentum is slightly lower in 2025 as compared to 2024, despite the company offering customers innovative products to enhance productivity levels. Moreover, its shares trade at a significantly higher multiple to peers, even though there is a similar operating margin and return on equity.

Erste Group’s analysis reveals that it anticipates software revenue from subscriptions to increase by 19% to 19.5% in the second quarter. The company’s operating margin and return on equity are roughly in line with the sector average. However, its expected P/E ratio for 2025 is significantly higher.

The valuation assessment led the firm’s analyst, Hans Engel, to assess that “the stock’s upside potential is therefore limited for the time being.” In turn, this led to the downgrade.

ServiceNow, Inc. (NYSE:NOW) is a technology company that offers a cloud-based software platform for automating business workflows within an enterprise.

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