ServiceNow, Inc. (NYSE:NOW) is one of the AI Stocks on the Market’s Radar. On December 17, Bernstein SocGen reiterated an “Outperform” rating on the stock with a $1,093.00 price target. Deeming NOW as the “cheapest large-cap software stock” after selloff, the firm sees the stock’s valuation as overly discounted compared to fundamentals and peers.
“The ‘cheapest’ large cap software stock?!? This is a title we didn’t think we’d ever write for a business we labeled as ‘the next Microsoft’. Yesterday we defended the potential Armis M&A that sent the stock down ~11%. Today we are reflecting on how cheap the stock is — ServiceNow’s Price to 3-year-out FCF (minus SBC) vs. growth rate (our model) is now below the most bearish AI-narrative impacted large cap application software peers like Adobe.”
Image by drobotdean on Freepik
Bernstein believes that the stock is severely undervalued despite demonstrating no signs of growth issues. It now trades at a lower valuation than Adobe, who has been the most impacted by AI fears. The stock is even trading below Salesforce, which has a weaker reputation.
“On this same basis, it is even trading below the reputation maligned-Salesforce that ServiceNow bears are comparing it to. We don’t see organic growth guide downs on the horizon, like mid-2022. In 2022, the guide down occurred in the midst of a bearish macro change, but current signals for 2026 are ‘normal’ IT demand.”
Meanwhile, management continues pointing toward accelerating demand, a view also supported by recent channel checks.
“Yes, if there is an unexpected macro shock, IT will probably be impacted (risks like AI-bubble popping, politics, etc.), but ironically the cost-efficiencies desired in a down market may still support demand for ServiceNow.”
ServiceNow, Inc. (NYSE:NOW) provides a platform that integrates workflows, data, and AI to coordinate how work flows across large organizations.
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.
READ NEXT: 10 Trending AI Stocks on Wall Street and 10 Buzzing AI Stocks on Wall Street.
Disclosure: None.
