ServiceNow Price Targets Hiked After Earnings Beat

ServiceNow surges after analysts boost their price targets on shares of the cloud-computing company.
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ServiceNow (NOW) - Get Report surged 8.6% to $339.71 Thursday after a host of analysts raised their price targets on shares of the cloud-computing company after ServiceNow surpassed Wall Street's fourth-quarter earnings expectations.

The Santa Clara, California-based company posted fourth-quarter net income of $598.7 million, or $3.03 a share, compared with $7 million, or 4 cents, a year earlier. Adjusted earnings were 96 cents a share, beating analysts' forecasts for earnings of 87 cents.

Revenue totaled $951.8 million, up from $715.4 million a year ago, and ahead of Wall Street's call for $941.3 million.

Keith Weiss, an analyst with Morgan Stanley, said the company's results indicated “a seamless transition to the new management team” with “no need for concern.” Weiss added that “the core growth drivers for ServiceNow appear to be fully engaged with the IT portfolio.”

In October, the company said that Bill McDermott, a former CEO at SAP, would come on board as president and CEO. In November, ServiceNow said Gina Mastantuono, former chief financial officer at Ingram Micro, would join as chief financial officer.

Weiss retained his equal-weight rating on the shares but raised his price target to $336 from $308.

Credit Suisse analyst Brad Zelnick, who maintained his outperform rating on the stock, raised his price target to $370 from $340, saying the company closed out 2019 with "strong" fourth-quarter results and set fiscal year 2020 guidance in line with consensus, which was better than many investors feared.

Zelnick said he thinks new management "reinvigorates already strong fundamentals," while maintaining consistency on controlled reinvestment and disciplined, "tuck-in" mergers and acquisition.

RBC Capital analyst Alex Zukin raised his price target on ServiceNow to $370 and kept his outperform rating.

Zukin told investors that he was positive on the company's strength across its product portfolio and its growing emphasis on "vertical-specific industry solutions," partner ecosystem investment and international investments.

Needham analyst Jack Andrews raised his price target on ServiceNow to $356 and kept his buy rating after its "strong" fourth-quarter results. He said that he was positive about the strategic priorities that McDermott disclosed.

He also said the company's key metrics beat expectations as its leading sales execution continues, with the quarter driven by "continued demand to create workflows around the enterprise's record system."