The shares of cloud-based software company ServiceNow plunged more than 4% after analysts at Guggenheim Partners downgraded the stock from “Neutral” to “Sell”.
In a note sent to clients, Guggenheim’s analyst John DiFucci said that he expects ServiceNow to report good quarterly results but believes there is a “material risk” that the company will have a “lower top-line subscription guidance for 2024.”
DiFucci also believes that ServiceNow won’t see the expected rise of its GenAI business until next year.
“Partner checks were generally positive for 2Q, but not as positive as they usually are. Several partners expressed concern about 2H24, especially since GenAI monetization is not happening en masse and is not likely to materialize this year, as management has suggested it would,” DiFucci wrote.
DiFucci, who previously downgraded ServiceNow stock from “Buy” to “Neutral” back in April, now has a price target of $640. This represents around 20% lower compared to the stock’s closing price of $806.51 on Friday. After a slide on Monday morning, Service Now stock is trading at $768.90 per share, being up 11.84% year-to-date.
ServiceNow is scheduled to report its quarterly earnings on July 24. The company previously forecasted its full-year subscription revenue to come at $10.56 billion to $10.575 billion.