Down 22% From Highs, ServiceNow Could Be Too Cheap to Ignore

Despite many tech and artificial intelligence (AI)-driven stocks surging in 2025, ServiceNow (NYSE: NOW) is a high-profile name that has failed to impress. As of the Oct. 1 close, shares have provided a return of -14%, and are down 22% from their 52-week high. The stock has shown particular weakness recently, down more than 11% in the past three months. This fall makes assessing the potential for significant recovery in NOW shares pertinent.

Below, we’ll break down what ServiceNow does, its financial trends, and strategic objectives. Doing so will show that there is significant reason to believe ServiceNow could stage a marked recovery going forward.

NOW: Massively Successful Workflow Platform Facing Downtrodden Sentiment

ServiceNow builds its business around its Now software platform. Now helps enterprises digitize and automate their workflows, thereby boosting efficiency and service quality. Providing these benefits to IT departments is ServiceNow’s most important domain. However, customer service, human resources, and legal teams also utilize the platform.

The Now platform has seen huge uptake, with adoption from 85% of Fortune 500 companies, demonstrating the significant value it adds for customers. In September 2023, the company rolled out Now Assist, its GenAI-powered add-on. From that time to the end of 2024, shares gained approximately 90%. Strong revenue growth, expanding margins, and excitement around the firm’s GenAI offering were key to this.

However, more recently, investor sentiment has been down based on the potential for disruption in ServiceNow’s market share. Some fear that emerging AI software firms could displace demand from ServiceNow’s platform. However, the key question for investors is whether this fear is translating into a significant deterioration of ServiceNow’s business. The reality indicates that these fears may be substantially overblown.

ServiceNow’s Fundamentals Show Little Signs of Weakness

By all accounts, ServiceNow’s business is continuing to chug along at an impressive pace. In 2025, revenue growth is forecast to come in at 20%. That’s only a moderate deceleration from growth rates of 24% in 2023 and 22% in 2024. This gradual slowdown is far from alarming as the company goes from generating $9 billion to over $13 billion annually in two years. The company’s remaining performance obligation growth also came in strongly at 29% last quarter. This indicates that the firm’s 20% revenue growth rate can persist.

Additionally, analysts project ServiceNow’s adjusted operating margin will increase to around 30.5% in 2025. This would result in an expansion of nearly 100 basis points over 2024 and more than 250 basis points over 2023.

Free cash flow margin is also projected to rise to over 32%. That would be up from 30% in 2023 and 31% in 2025. All of this is to say one thing: ServiceNow’s business looks poised to continue improving despite market sentiment. This creates a favorable outlook for the stock, as markets seem to be overweighting fears that are not substantially impacting the firm at this point.

Now Assist is also still in its relatively early stages, with the firm expecting to achieve $1 billion in annual contract value in 2026. Thus, the product has the potential to become a significantly larger part of ServiceNow’s business going forward. This could aid revenue growth rates and help the firm fend off emerging competitors. ServiceNow continues to invest in AI and is rolling out new features to stay ahead.

Analysts Eye Significant Upside with NOW’s Valuation Down Considerably

The MarketBeat consensus price target for ServiceNow is just over $1,122, which implies about 23% upside from its Oct. 1 closing price of $912. Analyst forecasts updated after the company’s latest earnings are even higher, averaging about $1,192 and underscoring growing confidence in the stock’s recovery potential.

This target, which incorporates the most recent financial data on ServiceNow, suggests substantially higher upside potential of 31%. Evidently, analysts are becoming increasingly bullish on this stock, even as shares fall, setting up a potential opportunity for investors to gain exposure to a firm with improving fundamentals.

A key valuation metric is also pointing to upside potential in ServiceNow shares. Its forward price-to-earnings (P/E) ratio sits at just over 50x. That’s down around 33% from its peak of nearly 75x, and down over 13% from the figure’s three-year average of approximately 55x. Overall, ServiceNow’s robust financials, burgeoning GenAI offerings, and moderately depressed valuation give shares a solid opportunity to rebound.

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