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Why ServiceNow Stock Slipped by Almost 4% Today

What happened

ServiceNow (NOW -3.60%) wasn’t of great service to its investors on Thursday. Shares of the cloud-based workflow-solutions provider lost nearly 4% of their value across the day after a researcher initiated coverage on the stock with only a lukewarm take on its potential.

So what

MoffettNathanson was the initiating party, with analyst Jackson Ader tagging ServiceNow stock with a hold recommendation at a $553 per-share price target. The reasons behind Ader’s take weren’t immediately apparent, but he’s not the only prognosticator whose take on the company is rather guarded.

Guggenheim’s John DiFucci also pegged it with the equivalent of a hold recommendation (with a price target of $510 per share) when his company initiated coverage in mid-August. While DiFucci feels the company’s management is very effective, he believes it’ll have difficulty hitting its long-term subscription revenue goals in the coming years.

That analyst’s take occurred shortly after ServiceNow reported its second-quarter results. While the estimates-beating results pleased many investors, subscription-revenue guidance missed projections. Consequently, several entities tracking the stock — such as BMO Capital and Truist Securities — cut their price targets, although most remained bullish on the company.

Now what

ServiceNow posted some very hot growth numbers in its early days, and like many tech companies, it’s starting to mature. Those figures, while still well in the double digits, aren’t as lofty as they used to be, and some are getting discouraged.

High valuations for the stock don’t help. But this is a company with talented management, as DiFucci pointed out, and offerings that should continue to be compelling.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ServiceNow, Inc. The Motley Fool has a disclosure policy.

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