ServiceNow heads into the week with a modest but meaningful shift: shorts have started covering, yet the position remains one of the most aggressive bets against a large-cap software name in the market.
The directional change in short interest is the key development since the last note. Shares short peaked near 68.4 million around June 3 and have since pulled back to 62 million — a decline of roughly 9% from that high. Short interest as a percentage of free float now reads 29.9%, down from the 31% flagged a week ago but still up 26% over the past month. The short score has eased alongside this, falling from 42.7 on June 3 to 40.0 today — its lowest reading in the ten-day window. Shorts are not capitulating, but the pace of accumulation has clearly stalled and modest unwinding has begun.
The lending market continues to offer no friction to bears on either side of that trade. Availability remains at 2,095% — still comfortably above the 52-week trough of 1,340% hit on June 3 — meaning there are roughly twenty shares available to borrow for every one currently shorted. Cost to borrow, while up 23% on the week, is running at just 0.39% annualised. That is a rounding error for anyone with conviction. Options positioning is equally calm: the put/call ratio ticked down to 0.74, fractionally below its 20-day average of 0.74 and far from the defensive 1.17 extreme seen in the past year. There is no evidence of crowded hedging or squeeze pressure.
The Street is positioned cautiously optimistic but at prices well above where the stock is trading. The mean analyst price target is $142, implying roughly 40% upside from the current $101. Recent analyst activity has been modestly constructive — Benchmark raised its target to $130 from $125 this week, and B of A Securities reinstated coverage at Buy with a $130 target in mid-May. Barclays and Evercore both nudged targets higher after the last earnings print. The bull case centres on FY25 NNACV of $2.3 billion growing 9% year-on-year and a credible path to 17%-plus subscription revenue growth by FY27. Bears, meanwhile, point to the $207 million CRPO shortfall — the largest sequential decline in the company's history — and a 72% year-on-year collapse in federal government obligations. The analyst recommendation factor score ranks in the 94th percentile across the universe, a signal of how uniformly constructive the sell-side remains despite the operational headwinds. Valuation, however, remains a structural drag: the EV/EBITDA multiple has compressed to 15x, down from 16x thirty days ago, while the PE of 22x and price/FCF above 70x leave the quality-adjusted value factor in the 14th percentile.
The peer group reinforces that this week's weakness in NOW is not idiosyncratic. CRM fell 7.8% on the week, WDAY dropped 9.6%, and TEAM shed 8%. NOW's 5.3% decline was among the shallower moves in the group, suggesting the shorts who built positions ahead of earnings are not getting the incremental follow-through they may have expected from a broader software selloff.
Next earnings fall on July 22 — and with the prior two prints producing moves of -12.5% and -15.3% on the day respectively, the distance between the analyst consensus and the current price, combined with still-elevated short interest near 30% of float, makes that date the pivotal moment for whether the short thesis consolidates or begins a more meaningful unwind.
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