Workplace software specialist ServiceNow (NOW 0.91%) is riding a strong tailwind of companies looking to digitize employee workflow. The stock is up 65% over the past year, but at recent prices it's 11% off its 52-week high of $815. This is a great buying opportunity, according to analysts at Baird.
The analysts came away from the company's recent analyst day with more confidence in its ability to capture a sizable addressable market. The firm reiterated an outperform (buy) rating on the shares and raised the price target from $870 to $885, implying a new high for the stock within the next year or so.
Why buy ServiceNow stock
ServiceNow reported a solid start to the year. In the first quarter, subscription revenue grew 25% year over year to $2.5 billion. CEO Bill McDermott credited the company's advantage in being first to market in digital workflows and investment to add more capabilities to its Now platform, including the Now Assist feature powered by artificial intelligence.
ServiceNow has experienced a small acceleration in top-line growth over the last year. Management sees annual subscription revenue reaching more than $15 billion by 2026.
Moreover, ServiceNow continues to grow free cash flow, now over $3 billion on a trailing-12-month basis. The company's consistent free cash flow growth along with strong top-line momentum could send the shares to new highs this year.
The analyst's price target is about 23% higher than Wednesday's closing price of $721.03. Assuming the company delivers on its guidance for approximately 22% subscription revenue growth, the share price could reach the $885 price target within the next year.
