Why AI Stock ServiceNow Stock Got Mashed on Monday

The future looks a little cloudy for the cloud services company — at least according to one analyst.

ServiceNow (NOW -4.99%) has been a popular stock lately, due in no small part to its assertive push into artificial intelligence (AI)-assisted solutions. On Monday, however, that popularity was dinged after an analyst downgraded the cloud computing specialist’s shares. As a result, ServiceNow shed nearly 5% of its value.

Now a sell, one pundit believes

Before market open, Guggenheim’s John DiFucci changed his recommendation on ServiceNow stock. The prognosticator now believes the specialty tech company is a sell; previously he had tagged it with a neutral rating. His new price target on the stock is $640 per share.

DiFucci believes ServiceNow will not disappoint with its second-quarter earnings release, which is scheduled to be published later this month. Rather, he feels that the company will struggle a bit in the latter half of the year, and certain optimistic assumptions by management might not be realized.

In his note detailing the downgrade, DiFucci wrote that ServiceNow “seems to be expecting an uptick in GenAI business in the second half, but our field work indicates this is not likely until 2025, if ever.

Fading optimism?

The analyst added that Guggenheim’s partner checks for ServiceNow were not as positive as they were in previous periods. He also expressed concern that the company’s take from a federal government contract won’t provide quite the same lift to its fundamentals as it did in late 2022 into mid-2023.

ServiceNow is slated to unveil those second-quarter results on Wednesday, July 24. On average, analysts tracking the stock are expecting the company to post revenue of just over $2.6 billion, and per-share earnings of $2.84.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ServiceNow. The Motley Fool has a disclosure policy.

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