Shares of ServiceNow (NYSE:NOW) climbed 5% after BofA Securities analyst Tal Liani began coverage with a Buy rating and a $130 price target - a level that implies roughly 37% upside from the prior close of $95.07. The move follows a stock decline of about 38% year-to-date.
BofA's initiation emphasizes ServiceNow's embedded role inside enterprise workflows. The firm described the company as the system that governs, routes, approves, and audits activity across organizations - functions the analyst believes will remain critical as artificial intelligence reshapes software operations.
"While AI is disrupting the software landscape, we think NOW stands to benefit from, rather than be replaced by, new AI solutions," the analyst wrote. BofA expects that the spread of autonomous agents across IT, employee, and customer workflows will increase demand for orchestration, permissions, approvals, policy enforcement, and auditability - areas aligned with ServiceNow's core offerings.
In support of this thesis, the analyst cited product and strategic elements such as AI Control Tower and Action Fabric, along with hybrid pricing models. BofA also pointed to ServiceNow's recent acquisitions of Armis and Veza as moves that bolster the company's security and identity context.
On the financial side, BofA projects revenue growth of 18-22% for the 2026-2028 period and anticipates free cash flow margins in the 35-37% range. The firm noted that contracted remaining performance obligations have grown by more than 20% for five consecutive quarters. Company management, according to the initiation, expects roughly 100 basis points of expansion in both operating margin and free cash flow margin in 2027.
BofA also highlighted valuation, noting the stock currently trades at about 14x calendar year 2027 estimated EV/FCF. The firm described that multiple as attractive given ServiceNow's projected growth and profitability relative to peers.
Market reaction to the initiation was immediate: the 5% intraday lift followed the publication of BofA's view, and premarket quotes reflected continued interest. The analyst's thesis centers on the notion that, rather than displacing centralized workflow platforms, AI-driven capabilities and autonomous agent deployments will increase demand for the orchestration, governance, and audit features ServiceNow provides.
Key takeaways
- Analyst initiation: BofA started coverage with a Buy and a $130 target, implying roughly 37% upside from a $95.07 close.
- Strategic positioning: ServiceNow's entrenched role in routing, approvals, and audits is viewed as an advantage as enterprises deploy AI and autonomous agents.
- Financial outlook: BofA forecasts 18-22% revenue growth for 2026-2028 and free cash flow margins of 35-37%, with management expecting about 100 basis points of margin expansion in 2027.
Areas of focus for markets and sectors
- Enterprise software and IT operations - expected to be affected by autonomous agent deployments and orchestration demand.
- Cybersecurity and identity - highlighted by the Armis and Veza acquisitions strengthening security context.