UPDATE: Goldman Sachs Initiates Coverage On ServiceNow

Goldman Sachs initiated coverage on ServiceNow Inc NOW Tuesday with a Buy rating and $80 price target.

Analysts led by Greg Dunham commented that “revenue growth is being driven by large enterprise adoption (i.e., 473 Global 2000 customers compares with 245 two years ago) and expanding revenue per customer ($275k vs. $227k last year).”

“We see ServiceNow’s beachhead within IT allowing the company to capture a bigger piece of an IT budget with time. The platform’s strategic positioning can be seen by large commitments customers place on ServiceNow (i.e., 107 customers pay ServiceNow more than $1mn annually and its largest customer is approaching $10mn per year),” according to the analyst note.

Dunham concluded, “Best-in-class sales productivity is supported by low churn and customer expansion tailwinds as IT professionals leverage ServiceNow beyond traditional IT Service operations (i.e., Incident mgmt., asset mgmt., change and configuration mgmt., etc.) to custom app development and internal service applications.”

The $80 price target was based on a “10-year DCF that assumes 30 percent FCF margins on ~$6bn in 2023 revenue, and a 13 percent WACC.”

ServiceNow recently traded at $64.52, up 1.7 percent