This article first appeared on GuruFocus.
ServiceNow (NYSE:NOW) Stanleyshares got a lift Wednesday after Morgan called worries about the software giant overblown. The stock jumped 2.4% in premarket trading after analyst Keith Weiss upgraded it to Overweight from Equal-Weight and slapped a Street-high $1,250 price target on it.
Weiss argued that ServiceNow’s fundamentals are holding up well despite a bumpy backdrop. Subscription revenue is still growing around 20% at constant currency, margins are running in the high-20% to low-30% range, and free cash flow is set to grow more than 20% this year. On top of that, the company has been ramping investment in generative AI features to help customers modernize their workflows.
Shares have lagged as investors fretted about AI execution risks and tighter federal spending. But Weiss thinks those fears are misplaced, saying the market is missing the forest for the trees. He sees multiple ways ServiceNow can hit its 2026 subscription revenue goal and keep compounding free cash flow growth well above 20%.
Morgan Stanley is betting ServiceNow’s AI push will drive durable growth, making it one of the stronger long-term plays in enterprise software.