Although the rating change follows ServiceNow Inc's (NYSE:NOW) stock falling below the price target, there could still be further downside, according to Guggenheim Securities.
The ServiceNow Analyst: Analyst John DiFucci upgraded the rating from Sell to Neutral, while removing the price target.
The ServiceNow Thesis: The company is facing new AI challenges and M&A-related risks, DiFucci said in the upgrade note.
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The company's results indicate that AI monetization has not materialized yet, he added.
ServiceNow has completed five M&A (merger and acquisition) transactions so far this year and recently announced plans to acquire the identity security startup Veza, the analyst stated. Meanwhile, Bloomberg reported that the company could be nearing a deal to buy security startup Armis for $7 billion.
"Besides the typical risk that's introduced from expensive M&A, we believe this strategy is not launched from a position of strength, nor points to savvy product strategy," the analyst wrote.
NOW Price Action: Shares of ServiceNow had risen by 0.86% to $771.81 at the time of publication on Tuesday.
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