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Why ServiceNow Stock Dove by Almost 3% on Wednesday

Source The Motley Fool

Investors turned away from business process software stock ServiceNow (NYSE: NOW) on Hump Day. That was on the back of an analyst's price target cut, even though said pundit remained generally optimistic about the company's prospects.

Regardless, the market's reaction was expressed in a sell-off that pushed the stock's price down by 2.6%, a steeper fall than the S&P 500's (SNPINDEX: ^GSPC) 1.1% slide.

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A reducing trend

Baird prognosticator Rob Oliver was the individual behind the move. Before the market open, he adjusted his ServiceNow price target downward, to $1,010 per share from his preceding $1,200. That was the bad news for the company and its investors. The good news was that Oliver maintained his outperform (read: buy) recommendation on the stock.

The continued bullishness wasn't exactly comforting to investors, as a $190 per-share price target reduction is substantial.

Oliver's reasoning wasn't immediately apparent, but it's hardly out of character for analysts tracking ServiceNow's stock. Last week, for example, Scotiabank's Allan Verkhovski made a roughly similar cut, reducing his fair-value assessment to $1,050 per ServiceNow share; previously he had flagged it as being worth $1,230. Like Oliver, he kept his equivalent of a buy recommendation intact.

Shooting for the moon

ServiceNow is clearly an ambitious company; one recent investor pullback was in reaction to its $2.85 billion deal to acquire artificial intelligence (AI) developer Moveworks. While such moves are grand and expensive, they indicate a management team that has lofty goals for the company and are busy devising ways to realize them. I wouldn't be overly concerned with a relatively minor price target cut.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ServiceNow. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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