ServiceNow Shows Bullish Momentum but Faces Technical Resistance and Potential Overvaluation Risks

Technical Analysis

ServiceNow (NOW) closed at $812.70 on April 23, 2025, up 5.98% ($45.87), reflecting strong bullish momentum. The stock traded intraday between $807.00 and $833.46, breaking above immediate resistance at $825.95 is needed to confirm continuation. The 14-day RSI at 49 suggests a neutral position, neither overbought nor oversold. However, the MACD remains negative (-25.78), indicating underlying bearish momentum over the last three months. The stock is trading below its 50-day ($853.86) and 200-day ($922.96) moving averages, signaling a lingering medium to long-term downtrend, despite the recent bounce. Average volume (2.22 million) is less than recent volume (5.08 million), indicating strong interest and volatility currently. Support lies near $808.40, with a stop-loss at $780.03 providing a risk floor.

For the next trading day (April 24, 2025), given the strong earnings-driven surge and market sentiment, intraday gains toward resistance ($825.95) are expected, but a pullback to support is possible due to technical overextension. For the upcoming week, a consolidation within the range $800–$830 is likely as the market digests the earnings beat and prepares for possible sector rotation.

Fundamental Analysis

ServiceNow reported a significant earnings beat for Q1 2025, driven by government cost-cutting initiatives boosting demand for its workflow software. The CFO's comments emphasize the positive impact of AI integration on growth prospects. The price-to-earnings ratio stands at 137.14, a premium valuation reflecting growth expectations but potentially exposing the stock to downside risk if earnings momentum falters. Trailing twelve months EPS is $6.83, and the stock's intrinsic value via discounted cash flow analysis is approximately $772.79, suggesting that the current price of $812.70 is slightly overvalued versus intrinsic fair value.

Analyst consensus rates ServiceNow as a "Buy" with 54 buys, 8 holds, and 1 sell out of 63 ratings, targeting a median price near $994.50 and a high of $1,025. The robust institutional sentiment aligns with the company’s strong market positioning and recurring revenue model, indicating positive medium to long-term prospects.

Intrinsic Value and Long-Term Investment Potential

The intrinsic value based on DCF at $772.79 implies modest overvaluation at current levels, underlining the importance of earnings growth to justify the premium. ServiceNow maintains competitive advantages in the digital workflow automation space, supported by continued AI integration and government sector demand. The stock's high P/E reflects growth pricing, but the gap between market price and DCF valuation warrants cautious evaluation. Over the long term, assuming consistent execution on innovation and market expansion, ServiceNow holds considerable upside potential, though entry points closer to intrinsic value may reduce valuation risk.

Overall Evaluation

ServiceNow exhibits strong fundamental performance and bullish near-term momentum triggered by an earnings beat and optimistic market catalysts. However, technical indicators highlight resistance levels and overextended valuation metrics in the short term. Given the premium P/E, slight overvaluation relative to intrinsic value, and mixed technical signals, the stock aligns best with a Hold stance in the current environment. Investors may await either a pullback toward support or enhanced confirmation of a trend reversal above moving averages before increasing exposure. The medium to long-term outlook remains constructive, contingent on sustaining growth and market penetration.