Analyst Note| Dan Romanoff |
ServiceNow reported upside relative to revenue and margin guidance for its fourth quarter and provided a surprisingly robust outlook for 2023. Currency headwinds improved, which drove most of the revenue upside, while disciplined expense management led to better margins. We view guidance as being about in line, which is surprisingly good in this environment. While we view the quarter as good overall, we have nonetheless lowered our estimates for this year and next as we have become more cautious based on macroeconomic conditions, and are therefore reducing our fair value estimate to $600 per share from $640. We continue to favor ServiceNow as one of our top picks for its long-term organic-driven growth—this is as it leverages its strength in workflow automation to bring its existing customers more deeply into IT, and more broadly with human resources and customer service-specific products, as well as its continued push into industry segment-specialized versions and operating efficiency.