We recently published a list of 10 Buzzing AI Stocks on Latest Analyst Ratings and News. In this article, we are going to take a look at where ServiceNow, Inc. (NYSE:NOW) stands against other buzzing AI stocks on latest analyst ratings and news.
CJ Muse, Cantor Fitzgerald analyst, explained in a latest program on CNBC that the AI investment cycle is different from the ones we have seen in the past. Muse believes major technology companies investing billions in AI are generating “meaningful” free cash flows.
“This cycle is unlike any other. I think most investors look back to the advent of the internet and how long the internet infrastructure investment cycle played out. But this one’s very different. The companies making the investments, predominantly the hyperscalers, are generating meaningful free cash flow despite spending hundreds of billions of dollars building out AI. Let’s be clear: this is existential for these companies as they all try to get to AGI. I think this is a multi-year investment cycle.”
The analyst talked about the latest AI model released by OpenAI and said the race is now to reach artificial general intelligence (AGI) and companies would require more and more computing power to improve the reasoning capabilities of AI systems.
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For this article, we picked 10 AI stocks currently making headlines on the back of latest analyst ratings and important news. With each stock, we have mentioned its hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Investors: 78
ServiceNow, Inc. (NYSE:NOW) is among the software stocks Stifel expects to thrive in 2025 amid a mix of artificial intelligence monetization, falling interest rates, economic growth, and limited exposure to China.
“We observed that after a strong CY23, which saw accelerating revenue growth fueled by easy year-over-year comparisons, peaking at around 15%, 2024 revenue growth slowed in Q2 to 11.8%, but then rebounded by 150 basis points to 13.3% in Q3,” said Stifel analysts, led by Brad Reback, in their detailed 2025 software outlook. “Although current projections expect a slowdown to around 11% in Q4, we anticipate a potential 300 basis points upside to these forecasts, considering normal seasonal trends and management’s cautious outlook.”
ServiceNow, Inc. (NYSE:NOW) impressed the market with strong Q3 results. But can the stock keep going higher? ServiceNow, Inc. (NYSE:NOW) recently launched its Now Platform Xanadu, adding more than 350 out-of-the-box generative AI capabilities to Now Assist. These features include data visualization automation, chat- and email-reply generation, change summaries, and LLM-based proactive prompts in Virtual Agent.
ServiceNow, Inc. (NYSE:NOW) also released RaptorDB Pro, a high-performance database enabling customers to centralize operational data and analytics onto ServiceNow platforms. These platforms are expanding the company’s abilities in the IT market.
ServiceNow, Inc. (NYSE:NOW) bulls believe the company’s organic revenue growth after fiscal 2025 could clock in between 20% to 22%. ServiceNow, Inc. (NYSE:NOW) can also expand its margins by 250bps annually, driven by 100bps from gross profits, 100bps from R&D reductions, and 50bps from SG&A leverage.
ServiceNow, Inc. (NYSE:NOW) will also benefit from organic growth catalysts. Grand View Research predicts that the global information technology service management (ITSM) market will grow at a CAGR of 9.3% from 2023 to 2030.
Polen Focus Growth Strategy stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its Q3 2024 investor letter:
“In the third quarter, the top relative contributors to the Portfolio’s performance were NVIDIA (not owned), Shopify, and ServiceNow, Inc. (NYSE:NOW). ServiceNow reported better-than-expected sales and bookings during the quarter, with subscription sales up +23%. Encouragingly, GenAI offerings within its product suite, rolled out in late 2023, already appear to be an incremental driver of this growth. In our view, ServiceNow is a great example of a consistent grower, with a strong moat serving diverse and growing end markets with expanding margin opportunities over time.”
Overall, NOW ranks 8th on our list of buzzing AI stocks on latest analyst ratings and news. While we acknowledge the potential of NOW, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.