ServiceNow (NOW) has been back in focus after CEO William McDermott bought US$3 million of shares and other leaders scrapped planned stock sales, reinforcing an internal show of confidence during AI driven sector worries.

The market reaction to that insider show of faith comes after a sharp reset, with a 30 day share price return of 21.67% and a 90 day share price return of 36.10%. This leaves ServiceNow at US$104.27 and a 1 year total shareholder return of 44.44%, alongside a 22.50% total shareholder return over three years. This suggests long term holders have still seen gains even as recent momentum has faded.

If AI volatility has you reassessing your tech exposure, it could be worth scanning our list of 58 profitable AI stocks that aren't just burning cash to see which names already pair AI exposure with positive earnings.

With ServiceNow shares down sharply over 30 and 90 days, yet trading at a roughly 38% discount to one intrinsic estimate, investors now face a simple question: is this a reset that opens up opportunity, or is the market already baking in future growth?

Most Popular Narrative: 4.2% Undervalued

According to andre_santos, the current ServiceNow share price of $104.27 sits slightly below a fair value estimate of $108.81, creating a modest valuation gap built on specific growth and margin assumptions.

📈ServiceNow has stellar operating margins and solid revenue and EPS growth. Also, the fact that it is able to return (ROIC) above its estimated cost of capital is nice to see.📉There''s some uncertainty around the SaaS industry currently given AI. This could disrupt in some way the business of this company, but I need to understand it a little bit more to have an opinion formed about it. Also, the company has been dilluting its shareholders during the last couple of years, but it can be easily justified by the need to expand growth.

Curious what is driving that fair value just above today''s price? The narrative leans on strong profitability, sustained revenue and EPS compounding, and a specific cost of capital path. Want to see how those inputs combine into one number, and where the most aggressive assumptions really sit? The full breakdown connects all those moving parts into a single fair value story.

Result: Fair Value of $108.81 (UNDERVALUED)

However, those assumptions could be challenged if AI driven shifts weigh on SaaS demand or if ongoing share dilution continues to chip away at per share value.

Another View: Expensive On Earnings

That slight 4.2% discount to the $108.81 fair value is only one side of the story. Our P/E work paints a much tougher picture, with ServiceNow at 62.4x earnings versus a fair ratio of 41.5x, the US Software industry at 25.4x and peers at 42.6x. If the market drifts nearer that fair ratio, what does that mean for anyone buying at today’s earnings multiple?

Next Steps

If this mix of optimism and caution feels familiar, now is a good time to look through the numbers yourself and stress test the story. To see what others are focusing on, you might want to review the 3 key rewards and weigh those points against your own expectations.

Looking for more investment ideas?

If this ServiceNow story has sharpened your thinking, do not stop here. Use the Simply Wall St Screener to hunt for your next high conviction idea.

• Spot potential mispricings early by running through our 54 high quality undervalued stocks, so you are not chasing stocks after the crowd moves in.
• Prioritise resilience by focusing on companies from our 87 resilient stocks with low risk scores, where lower risk scores help you keep a steadier portfolio.
• Get ahead of the market by scanning our screener containing 23 high quality undiscovered gems, before these quieter quality names hit everyone else’s radar.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.