Guggenheim turns bullish on valuation despite AI concerns
Shares of ServiceNow (NYSE:NOW) rose about 4% on Wednesday after Guggenheim upgraded the enterprise software company to Buy from Neutral, assigning a price target of $125.
Following Tuesday’s closing price of $99.28, Guggenheim’s target implies additional upside and values the company at approximately 7.5 times enterprise value to next-twelve-month recurring revenue. Although that represents a premium to many software-as-a-service peers, the brokerage believes the valuation is justified.
Analyst sees attractive entry point
Analyst John DiFucci said the recent weakness in ServiceNow’s share price has created a compelling opportunity for investors.
“We believe current levels present an attractive opportunity for investors to purchase a comfortably profitable stock likely to continue to grow at double digits,” DiFucci said.
The analyst also pointed to expectations for improving demand from the U.S. Federal Government as a potential catalyst for future growth.
Shares have significantly underperformed
The upgrade follows a prolonged period of weakness for ServiceNow shares.
Since Guggenheim raised its rating from Sell to Neutral in December 2025, the stock has fallen roughly 35%, substantially underperforming both the IGV software index, which declined 16%, and the S&P 500, which gained 10% over the same period.
Much of the weakness has been driven by investor concerns that advances in artificial intelligence could disrupt the company’s long-term growth prospects.
AI risks remain, but not a long-term threat
Despite the upgrade, Guggenheim maintained a cautious stance on artificial intelligence.
DiFucci said the firm does not expect AI monetisation to become a meaningful earnings driver in the near future and acknowledged that AI-related risks remain significant.
However, Guggenheim also argued that artificial intelligence is unlikely to become ServiceNow’s “death knell.”
Long-term fundamentals support the investment case
Instead, the brokerage believes investors are being offered the chance to buy a high-quality, profitable software company at a considerably lower valuation than in previous years.
While Guggenheim noted ongoing challenges—including competition for AI talent and continued reliance on acquisitions such as the Armis deal to support future expansion—it believes those risks are already largely reflected in the current share price.