ServiceNow Trades 16% Below 52-Week High: Buy, Sell or Hold the Stock?

Core Insights - ServiceNow (NOW) shares closed at $1,011.89, approximately 15.5% below its 52-week high of $1,198.09, with a year-to-date decline of 4.5% compared to the Zacks Computer and Technology sector's return of 5.7% and the Computers – IT Services industry's drop of 6.3% [1][9] Financial Performance - ServiceNow's shares have increased by 24.5% since reporting first-quarter 2025 results, benefiting from the rising adoption of its workflows amid digital transformation [7][9] - Subscription revenues reached $3.01 billion in Q1 2025, reflecting a year-over-year growth of 20% in constant currency [16] Market Challenges - The company faces challenges from a worsening macroeconomic environment, including tariff impacts and unfavorable forex, with expected forex impacts of $175 million for 2025 [2][9] - Delayed federal contracts and DOGE-related issues are anticipated to negatively affect the federal business growth rate [2] Strategic Developments - ServiceNow is focusing on accelerating the adoption of its Agentic AI, which may impact subscription revenue growth in 2025 [3] - The introduction of the Core Business Suite in May 2025 aims to streamline operations across various departments, enhancing efficiency and employee experiences [12] - Recent acquisitions, such as Logik.ai, are expected to bolster ServiceNow's CRM offerings, particularly in sales and order management [15] Partnerships and Collaborations - ServiceNow has established partnerships with major companies like Amazon, Microsoft, and NVIDIA, enhancing its AI capabilities and expanding its market traction [17][19] - Collaborations with NVIDIA aim to integrate advanced AI models into the ServiceNow platform, optimizing business transformation [19] Earnings Estimates - The Zacks Consensus Estimate for 2025 earnings is $16.54 per share, indicating an 18.82% increase from the 2024 reported figure [20] - The consensus for Q2 2025 earnings is $3.54 per share, suggesting year-over-year growth of 13.1% [20] Valuation Concerns - NOW stock is considered overvalued, with a forward 12-month Price/Sales ratio of 14.75X, significantly higher than the broader sector's 6.51X [21][24]