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ServiceNow’s (NYSE:NOW) stock fell about 3% premarket on Monday after Guggenheim downgraded the shares to Sell from Neutral noting that the second quarter of 2024 is fine, but future risks don’t match valuation.
The firm introduced a price target of $640 on the shares of the Santa Clara, Calif.-based company, which provides intelligent workflow automation platform solutions for digital businesses.
The analysts believe that the second quarter of 2024 will be fine when ServiceNow reports its earnings July 24, however they think the second half of the year presents risk to consensus Subscription, presenting material risk in the stock.
The analysts added that the company seems to be expecting an uptick in generative AI, or GenAI, business in the second half of the year, but their field work suggests that this is not likely until 2025, if ever.
Partner checks were generally positive for the second quarter, but not as positive as they usually are, according to the analysts.
Several partners expressed concern about the second half of the year, especially since GenAI monetization is not happening en masse and is not likely to materialize this year, as management had suggested it would, the analysts added.
ServiceNow (NOW) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors’ average rating is more positive with a Buy and so is the average Wall Street analysts’ rating, Strong Buy.