ServiceNow Stock Down 54% From Peak Despite Bullish Analyst Outlook

Shares of enterprise software company ServiceNow (NYSE:NOW) have declined nearly 54% over the past year, erasing a significant portion of their value. Despite the steep sell-off, Wall Street analysts remain largely bullish, pointing to continued revenue growth and a potential recovery of over 40% from current levels.

A Tale of Two Tapes

The stock has fallen from a 52-week high of $210.20 to a recent price of $96.70, a drop of 53.9%, according to a report from Investing.com. This decline has occurred even as the company's underlying business performance remains robust.

ServiceNow's recent second-quarter results beat expectations, with revenue of $3.99 billion against a forecast of $3.93 billion. Furthermore, forward-looking estimates project strong growth:

• Revenue Growth (2026E): Forecast at 21.9%
• EPS Growth (2026E): A projected rebound of 150.5%

Margin Pressure and AI Spending

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A key factor driving the stock's underperformance has been pressure on profit margins. The company's subscription gross margin fell from 83.0% to 80.5%, a compression attributed to heavy investments in artificial intelligence and partnerships with cloud hyperscalers.

This company-specific issue is compounded by a broader sector-wide rerating. The software sector has underperformed the Nasdaq 100 by 40% over the past two years, placing additional pressure on stocks like ServiceNow, according to the report.

Analyst Consensus Remains Positive

Despite the near-term challenges, a consensus of 46 analysts covering the stock maintains a 'Strong Buy' rating. The average price target stands at $140.25, which implies a potential upside of over 43% from its recent trading price.

However, some caution is warranted, as the company saw 33 negative earnings revisions in the last quarter. For investors, a sustained recovery will likely depend on ServiceNow demonstrating a clear return on its AI initiatives without further eroding its profit margins.