ServiceNow: A Premium That Is Set To Burst As Growth Slows

Gary Alexander
31.09K Followers
(9min)

Summary

  • ServiceNow's valuation is extremely stretched, trading at 15.2x EV/FY25 revenue and ~60x P/E, far above peers with similar growth rates.
  • Growth is slowing, with only a slight boost to the FY25 outlook and near-term headwinds expected from federal budget cuts.
  • Despite AI automation claims, ServiceNow's growing headcount limits margin expansion, undermining justification for its premium multiple.
  • Given market highs and macro uncertainty, I reiterate my sell rating—ServiceNow's fundamentals don't support its current stock price.
ServiceNow office building at their headquarters in Santa Clara, California, USA

JHVEPhoto

With stock markets bouncing around nervously near all-time highs, investors should take extreme caution to prune out expensive growth stocks from their portfolios that no longer have much fundamental justification for their premiums. The booming stock market is set against a very

This article was written by

31.09K Followers
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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