ServiceNow (NYSE:NOW) shares jumped roughly 4% on Wednesday after Guggenheim analyst John DiFucci raised his rating on the enterprise software company from Neutral to Buy and set a $125 price objective.
DiFucci’s new target, measured against ServiceNow’s most recent closing price of $99.28 on Tuesday, implies a valuation equal to 7.5x EV/NTM Recurring Revenue. Guggenheim acknowledged that this multiple sits at a premium relative to other software-as-a-service peers but argued the premium is warranted given the company’s profitability and growth prospects.
In his note, DiFucci wrote: "We believe current levels present an attractive opportunity for investors to purchase a comfortably profitable stock likely to continue to grow at double digits," calling out anticipated improvement in the important U.S. Federal Government sector as a key positive.
Guggenheim’s upgrade follows a period of significant underperformance for ServiceNow. Since the firm revised its view from Sell to Neutral in December 2025, the stock has lost 35% of its value. That drop has outpaced the declines in the IGV software index, which fell 16% over the same span, even as the S&P 500 gained 10%.
DiFucci’s stance on AI is cautious. He warned that meaningful AI monetization for ServiceNow is unlikely to materialize in the near term and that risks tied to AI remain "very real." At the same time, Guggenheim stopped short of labeling AI as an existential threat for the company, stating AI would not be ServiceNow’s "death knell."
The firm described ServiceNow as a well-managed company that appears undervalued in the market, even after accounting for thematic risks. Those risks, as noted by Guggenheim, include potential talent migration to AI-native startups and a continued dependence on acquisitions to drive growth - with the Armis deal cited as an example of that acquisitive strategy.
Investors and market participants will likely weigh the upgraded rating and premium valuation against the persistent uncertainties tied to AI adoption, talent dynamics, and acquisition-driven expansion as they evaluate ServiceNow’s stock going forward.