ServiceNow Inc. (NYSE: NOW) took a small step back on Wednesday, with shares dropping almost 2% as traders decided to lock in some gains after the stock's recent bounce. The dip came during a fairly quiet day for the broader market, with the Nasdaq slipping 0.11% and the S&P 500 barely moving, up just 0.02%.
ServiceNow's Pullback: A Technical Checkup
MarketDash
ServiceNow (NOW) shares slipped nearly 2% as traders banked profits. Here's a look at the technicals, analyst targets, and what could come next.
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The Technical Picture
Let's dig into the charts. ServiceNow is still sitting above several key moving averages, which is a good sign. The stock is trading 1.7% above its 20-day simple moving average of $122.30, 12.7% above its 50-day SMA of $110.32, and 4% above its 200-day SMA of $119.58. So, short-term, things look okay.
But the longer-term trend is a bit murkier. The 50-day SMA is still below the 200-day SMA, which is a classic bearish signal. It suggests that the stock hasn't fully repaired its broader trend yet, even after the recent rally.
Momentum is also starting to fade. The moving average convergence divergence (MACD) indicator is below its signal line and has a negative histogram. That means the recent push higher might struggle to keep going unless buyers step back in with conviction.
Looking at the price action, ServiceNow hit a swing low in June and a swing high in August. It also broke below support in August before starting its latest rebound. So, there's a bit of a mixed bag here.
On the upside, key resistance sits near $139. If the stock can push toward that level, it would be a real test of the recovery's strength. On the downside, support is around $117.50, where buyers have previously stepped in to catch the fall.
What Analysts Are Saying
Valuation is a big talking point here. ServiceNow trades at a price-to-earnings ratio of 79.4, which is pretty rich. That premium valuation could leave the stock more vulnerable if growth or momentum starts to weaken.
Despite that, the analyst community remains bullish. ServiceNow has a consensus Buy rating and an average price target of $140.39. Recent analyst actions include:
- Bank of America Securities maintained a Buy rating and raised its price target to $150 on Aug. 19.
- TD Cowen maintained a Buy rating and a $140 price target on Aug. 17.
- Wells Fargo maintained an Overweight rating and raised its price target to $175 on Aug. 12.
The MarketDash Edge Scorecard
Our Edge scorecard gives a quick snapshot of ServiceNow's strengths and weaknesses relative to the broader market:
- Momentum: 53.18 - The stock is above key moving averages, but short-term momentum is cooling.
- Quality: 31.09 - A moderate quality score, which puts more emphasis on execution.
- Value: 9.63 - ServiceNow scores poorly on traditional value measures. That premium valuation could make pullbacks deeper when momentum fades.
- Growth: 71.16 - A strong growth score, showing investors still see ServiceNow as a long-term growth story.
Overall, ServiceNow has a growth-focused profile but carries a clear valuation risk. If momentum continues to fade, the stock may need strong business execution or broader market support to hold above those key technical levels.
ETF Exposure
ServiceNow is a holding in several tech-focused ETFs, which can add to buying or selling pressure in the stock:
- iShares Expanded Tech-Software Sector ETF (BATS: IGV): 4.02% weighting
- Global X Cloud Computing ETF (NASDAQ: CLOU): 4.12% weighting
- GraniteShares 2x Long NOW Daily ETF (NASDAQ: NOWL): 66.65% weighting
Inflows or outflows from these funds can create additional momentum in ServiceNow shares. NOWL, in particular, has a strong connection to the stock because it seeks leveraged daily exposure to ServiceNow.
Price Action
At the time of publication Wednesday, ServiceNow shares were down 1.79% at $124.73, according to market data.
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