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: ServiceNow stock rises despite cautious cloud outlook in analyst note

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Shares of ServiceNow Inc. may be 7% in trading Monday, but the skies remain ominous for cloud-computing platforms in 2023 and beyond.

The San Francisco-based company
NOW,
+6.50%

is one of several cloud vendors identified and downgraded by Truist Securities as vulnerable to treacherous macro economic trends such as weakness in Europe, the Middle East and Africa; lengthening IT sales cycles, foreign-exchange headwinds, and concerns over the small business customer base.

“For most, the onset of these challenges began in the second half of the year and are poised to continue in 2023,” Truist Securities analyst Joel Fishbein Jr. said in a note Monday that cut its growth outlook for ServiceNow
NOW,
+6.50%
,
CheckPoint Software Technologies Ltd.,
CHKP,
-0.26%
,
PagerDuty Inc.
PD,
+4.60%
,
Zscaler Inc.
ZS,
+4.29%
,
Cloudflare Inc.
NET,
+4.91%
,
Atlassian Corp.
TEAM,
+4.76%
,
Dynatrace Inc.
DT,
+4.33%
,
and others.

“Questions remain about the sturdiness of cloud software businesses,” Fishbein wrote. “To investors who have heard for most of the last decade that the subscription model makes these businesses “different” than the past, 2023 will be a proving ground.”

While growth in cloud computing over the past decade has made companies like ServiceNow “relatively more resilient than tech darlings of the past,” Fishbein sees the “elasticity of the cloud as a potential headwind as customers have the ability to optimize their workloads easier than ever before.”

ServiceNow’s stock is down 32% over the past 12 months; the broader S&P 500 index
SPX,
+0.95%

has declined 16% the last year.

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