An analyst downgraded ServiceNow (NOW) to a "sell" rating. The analyst argued the company's valuation is difficult to justify in the current high-yield environment.
The report highlighted that recent growth relies heavily on acquisitions. This includes the $7.75 billion deal for Armis. This raises questions about ServiceNow's organic performance.
The analysis noted ServiceNow's revenue growth is solid. However, it is not accelerating as quickly as some SaaS peers.
ServiceNow prioritizes growth over significant margin expansion. This strategy may be losing favor as the tech sector increasingly focuses on profitability.
Despite the downgrade, ServiceNow's stock recently saw upward momentum. This was partly in sympathy with positive results from Accenture. Accenture's results lifted sentiment across the software sector.