Goldman puts ServiceNow on its conviction buy list, sees 50% rally in the software stock
ServiceNow 's recent struggles should prove temporary as the company will soon resume its growth to become a major player in enterprise software, according to Goldman Sachs. The investment firm added the stock to its conviction buy list, with analyst Kash Rangan saying in a note to clients on Thursday that the pandemic delivered a temporary hit to ServiceNow's customer base that should lift. 2022 could be be a bounce back year for the company "given that net new business growth, which is a leading indicator for revenue growth, is accelerating with 1Q21 better than 4Q20 and 2Q21 tracking ahead of 1Q21," Goldman said. "If this continues through 2H21, ServiceNow may reaccelerate revenue growth in C22." The company is trading below its pre-pandemic multiple of enterprise value to sales, Goldman said, and the stock has fallen 17% since late April. The firm reiterated its price target of $695 per share, which is nearly 50% above where the stock closed on Wednesday. Looking further out, Goldman projects that ServiceNow could exceed $15 billion in subscription revenue in 2026. The company reported just under $1.3 billion in subscription revenue for its most recent quarter. "Average deal sizes are very large, highlighted by Customer Workflow deals at ~$267K and Creator Workflow deals at ~$225K. As well, we believe that dollar for dollar, NOW can complement Salesforce.com and Workday in how big they are in Customer Support and HR, respectively," the note said. -CNBC's Michael Bloom contributed to this report.

Bill McDermott, CEO of ServiceNow. Adam Jeffery | CNBC