Key Moments
- ServiceNow (NYSE:NOW) shares climbed 5% after BofA Securities began coverage with a Buy rating and a $130 price objective.
- BofA projects 18-22% revenue growth from 2026-2028 and free cash flow margins of 35-37%, with additional margin expansion anticipated in 2027.
- The firm argues AI will enhance ServiceNow’s role in enterprise workflows rather than displace it, reinforcing demand for its orchestration and governance capabilities.
New Coverage Sparks Rally in ServiceNow Shares
ServiceNow (NYSE:NOW) advanced 5% after BofA Securities analyst Tal Liani initiated coverage of the stock with a Buy rating and a $130 price target. The target implies an upside potential of 37% from Friday’s closing price of $95.07.
The bullish call followed a period of pressure on the stock, which has dropped roughly 38% on a year-to-date basis. BofA framed the pullback as an opportunity, emphasizing the company’s central role in managing enterprise workflows.
AI Positioned as a Tailwind, Not a Threat
BofA underscored ServiceNow’s function as a core workflow platform that “governs, routes, approves, and audits” activity across organizations. That embedded role led the firm to conclude that artificial intelligence is more likely to reinforce, rather than displace, the company’s position.
“While AI is disrupting the software landscape, we think NOW stands to benefit from, rather than be replaced by, new AI solutions,” the analyst commented.
According to BofA, ServiceNow’s existing workflow entrenchment could enable it to capture growth from autonomous agent deployments across IT, employee, and customer-facing processes. The firm expects these AI-driven agents will create additional needs for orchestration, permissions, approvals, policy enforcement, and auditability – all areas where ServiceNow is already active.
AI Product Stack and Strategic Acquisitions Highlighted
The analyst pointed to several specific elements of ServiceNow’s AI roadmap as supportive of the investment case. These include AI Control Tower and Action Fabric, which BofA cited as integral parts of its AI offering, as well as hybrid pricing models designed to monetize AI capabilities.
In addition, the firm referenced the company’s recent Armis and Veza acquisitions as strengthening security and identity context across workflows, further enhancing the platform’s relevance in AI-enabled environments.
Growth Outlook and Margin Profile
BofA laid out a constructive multi-year financial outlook for the company. The firm projects revenue growth of 18-22% for the 2026-2028 period, alongside free cash flow margins in the 35-37% range.
The bank also noted that contracted remaining performance obligations have grown more than 20% year-on-year for five straight quarters, signaling strong underlying demand. Management, according to the note, expects approximately 100 basis points of expansion in both operating margin and free cash flow margin in 2027.
| Metric | BofA View / Guidance |
|---|---|
| Rating | Buy |
| Price target | $130 |
| Implied upside vs. Friday close | 37% |
| Friday closing price | $95.07 |
| Year-to-date share price move | -38% (approximately) |
| 2026-2028 revenue growth forecast | 18-22% |
| Free cash flow margin forecast (2026-2028) | 35-37% |
| CRPO growth | >20% for five consecutive quarters |
| Expected 2027 margin expansion | ~100 bps in operating and FCF margins |
| Current valuation | 14x CY27E EV/FCF |
Valuation Relative to Growth and Profitability
BofA observed that ServiceNow currently trades at 14x CY27E EV/FCF. In the firm’s view, this multiple is compelling when considered alongside the company’s projected growth trajectory and profitability profile compared with peers.
On that basis, BofA contends that the stock offers attractive risk-reward, supported by durable workflow positioning, expanding AI-driven use cases, and a solid backlog as reflected in contracted remaining performance obligations.
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