Stifel Sees Long-Term Value in ServiceNow (NOW) Despite Near-Term Headwinds

ServiceNow Inc. (NYSE:NOW) is among the best debt-free stocks to buy now. Stifel analyst Brad Reback, who rates NOW as Buy, flagged a potential near-term headwind for ServiceNow (NOW), according to a January 14 report by The Fly.

The analyst identified a reduction in U.S. federal spending tied to workforce changes, with a Treasury Department contract showing a roughly $15 million cut in spending with the company. According to Reback, this reduction was driven by a de-obligation of funds under the government’s Deferred Resignation Program (DRP).

The DRP was launched by the Department of Government Efficiency in early 2025 and allows federal employees to take fully paid leave, provided they resign by September 30, 2025. The Stifel analyst believes this program is now beginning to weigh on software seat counts across federal agencies.

With estimates suggesting roughly 200,000 non-Department of Defense employees opted into the program, Reback expects additional contract adjustments to emerge.  He argues that this may create an incremental headwind to growth for seat-based enterprise software models through 2026.

In his January 9 note, Reback had reaffirmed his Buy rating and trimmed his price target from $230 to $200, implying over 40% upside. Around January 12, Goldman Sachs also initiated coverage of ServiceNow Inc. (NYSE:NOW) with a Buy rating and a $205 price target.

ServiceNow Inc. (NYSE:NOW) provides cloud-based platforms for digital workflows, enabling organizations to automate and optimize their business processes. The company’s Now Platform offers solutions across IT service management, customer service, HR, and other areas.

While we acknowledge the potential of NOW as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.