It's been a good week for ServiceNow, Inc. (NYSE:NOW) shareholders, because the company has just released its latest yearly results, and the shares gained 2.8% to US$767. The result was positive overall - although revenues of US$9.0b were in line with what the analysts predicted, ServiceNow surprised by delivering a statutory profit of US$8.42 per share, modestly greater than expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
View our latest analysis for ServiceNow
Taking into account the latest results, the current consensus from ServiceNow's 34 analysts is for revenues of US$10.9b in 2024. This would reflect a substantial 22% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to dive 34% to US$5.55 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$10.8b and earnings per share (EPS) of US$4.79 in 2024. Although the revenue estimates have not really changed, we can see there's been a substantial gain in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target rose 13% to US$826, suggesting that higher earnings estimates flow through to the stock's valuation as well. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values ServiceNow at US$910 per share, while the most bearish prices it at US$640. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 22% growth on an annualised basis. That is in line with its 24% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 12% annually. So it's pretty clear that ServiceNow is forecast to grow substantially faster than its industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards ServiceNow following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on ServiceNow. Long-term earnings power is much more important than next year's profits. We have forecasts for ServiceNow going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for ServiceNow that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.