Why ServiceNow (NOW) Stock Is Trading Up Today

What Happened?

Shares of enterprise workflow automation company ServiceNow (NYSE:NOW) jumped 1.5% in the morning session after Morgan Stanley upgraded the stock to Overweight from Equal Weight, citing that perceived risks were exaggerated. 

The firm raised its price target on the shares to $1,250 from $1,040. In a research note, the analyst stated that the company's consistent performance had been overshadowed by concerns related to generative artificial intelligence and federal spending. However, Morgan Stanley expressed confidence that ServiceNow was well-positioned to meet its targets, projecting a 20% increase in subscriptions and over 20% growth in free cash flow through fiscal 2027. The firm believed the company could deliver on its generative AI capabilities, creating an attractive opportunity for investors.

After the initial pop the shares cooled down to $940.70, up 1.5% from previous close.

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What Is The Market Telling Us

ServiceNow’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 16 days ago when the stock gained 3.3% as the stock extended its positive momentum as the company announced a significant agreement with the U.S. General Services Administration (GSA) to advance AI-driven modernization across federal agencies. 

The "OneGov" agreement expands ServiceNow's federal footprint by offering agencies access to its Information Technology Service Management (ITSM) software at discounts of up to 70%. This initiative is expected to boost government workflow efficiencies by as much as 30%. 

Following the news, Wall Street analysts reiterated their positive outlooks. Truist Securities maintained its "Buy" rating on the stock with a $1,200 price target, highlighting the company's impressive gross profit margins and strong revenue growth. 

Similarly, Stifel reiterated its "Buy" rating, noting an uptick in federal business performance. This momentum is supported by a strong second quarter, where ServiceNow saw total revenue grow 22.5% and increased the number of customers with over $20 million in annual contract value by 30% year-over-year.

ServiceNow is down 10.8% since the beginning of the year, and at $940.70 per share, it is trading 19.6% below its 52-week high of $1,170 from January 2025. Investors who bought $1,000 worth of ServiceNow’s shares 5 years ago would now be looking at an investment worth $2,045.

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