UBS Downgrades ServiceNow (NOW) to Sell, Hates Valuation

October 1, 2012 1:03 PM EDT Send to a Friend
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Price: $63.98 -0.23%

Rating Summary:
    21 Buy, 3 Hold, 0 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 13 | Down: 18 | New: 41
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ServiceNow (NYSE: NOW) is under heavy pressure Monday after UBS downgraded the stock from Neutral to Sell with a price target of $28.00.

The firm said while they are not questioning the strong fundamentals, they don't like the valuation.

"NOW’s IP, 1st mover status, and strategic vision clearly position NOW to disrupt the ITOM market.. But we think investors are paying too much too soon for potential success," analyst Brent Thill comments. He cited: 1) valuation at 15.7x FY13e EV/sales is 2nd highest in software and a 52% premium to a software 'disruptor' comp group, 2) mkt cap higher than TAM is a warning sign and its $6.1B market cap is ~1.5x its est'd core TAM, 3) NOW's market cap is ~1/3 of CRM's despite CRM's est'd 10x more revs in ’13 and 2x+ higher LT TAM, 4) average PT of Buy-rated analysts is 20% below current price.

For an analyst ratings summary and ratings history on ServiceNow click here. For more ratings news on ServiceNow click here.

Shares of ServiceNow are down 6.9 percent to $36 mid-day Monday.


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