Why ServiceNow Stock Slipped Nearly 4% Today

What happened

Service Today (NOW -3.60%) did a disservice to its investors on Thursday. Shares of the cloud-based workflow-solutions provider lost nearly 4% of their value on the day after a researcher started coverage on the stock with only a lukewarm take on its potential.

What now?

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 hiring are not immediately apparent, but he is not the only prognosticator whose welcome to the company is somewhat guarded.

Guggenheim’s John DiFucci also gave it the equivalent of a hold recommendation (with a price target of $510 per share) when his firm initiated coverage in mid-August. Although DiFucci feels the company’s management is very effective, he believes it will struggle to meet its long-term subscription revenue goals in the coming years.

That analyst review came shortly after ServiceNow reported its second quarter results. While the estimate-beating results cheered many investors, subscription revenue guidance missed projections. As a result, some entities that track the stock — such as BMO Capital and Truist Securities — cut their price targets, although most remained bullish on the company.

What now

ServiceNow posted some pretty hot growth numbers in its early days, and like many tech companies, it’s starting to get old. Those figures, while still in the double digits, are not as high as they used to be, and some are discouraged.

The high valuation for the stock doesn’t help. But this is a company with good 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 and recommends ServiceNow, Inc. The Motley Fool has a disclosure policy.

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