As of closing bell on June 6, shares of enterprise software darling Palantir Technologies have gained 69% on the year, making it the top-performing stock in the Nasdaq-100 index.
While Palantir appears to be on an unstoppable run, smart investors understand that there are other opportunities at the intersection of artificial intelligence (AI) and software.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
One AI software company that has become overshadowed by Palantir’s rise is ServiceNow (NYSE: NOW), a provider of various cloud-based workplace management solutions and solutions for information technology (IT) professionals.
With a share price of over $1,000 as of this writing, ServiceNow is a potential candidate for a stock split in the near future.
Let’s talk about why that is, and whether the stock is a good buy right now.
What is a stock split, and how does it work?
From time to time, a company may choose to split its stock, increasing its share count while decreasing its share price in proportion. In a 10-for-1 stock split, the company’s share price decreases by a factor of 10 while its outstanding shares rise tenfold. Therefore the market cap remains unchanged.
Image source: Getty Images.
Why does ServiceNow make a good stock-split candidate?
Over the last 12 months, ServiceNow’s stock price has climbed by 46%, dwarfing the 12% and 14% gains of the S&P 500 and Nasdaq Composite indexes, respectively.
Unfortunately, 2025 has been a different story so far. As of the closing bell on June 6, shares of ServiceNow are down by 3% on the year. Admittedly, this is a little peculiar, as software-as-a-service (SaaS) businesses are relatively insulated from tariffs, which have been the biggest drain on the stock market this year.
ServiceNow may have underperformed this year in part because of analyst suspicions that the company’s public sector business could be at risk from the budget-cutting government project known as the Department of Government Efficiency (DOGE).
If investors have been panic-selling ServiceNow over DOGE concerns, it’s ironic, because Palantir — which derives more than half of its revenue from government contracts — hasn’t witnessed a similar dynamic.
My thinking is as follows: With a share price north of $1,000, ServiceNow appears more expensive than other enterprise software stocks such as Palantir, Salesforce, and SAP.
Oftentimes, a company will decide to split its stock in an effort to reignite interest from investors. The lower share price can sometimes lead to a resurgence in buying.
Considering ServiceNow has never done a stock split and the share price has underwhelmed compared to its peers this year, now could be an interesting time for management to consider a split.
Is ServiceNow stock a good buy?
Smart investors understand that the share price alone doesn’t dictate the value of a company. The chart below compares ServiceNow’s price-to-sales ratio (P/S) to those of some of its leading peers. (I excluded Palantir from this cohort because the company’s P/S of 102 makes it a clear outlier.)
NOW PS Ratio data by YCharts
I think it’s reasonable to say that ServiceNow is indeed a pricey stock, as its P/S of 18.8 is the highest in this group and far ahead of most.
The question investors should consider is whether ServiceNow deserves its premium. I think the answer is yes.
Per the company’s first-quarter earnings, ServiceNow’s AI-powered services continue to drive demand for its software, as shown by healthy increases in remaining performance obligations. In addition, I see management’s current guidance as robust overall, considering all the uncertainties driving the economic environment right now and the competitive market for AI-powered software solutions.
Whether the company performs a stock split or not, I see ServiceNow as a solid long-term buy-and-hold opportunity.
Should you invest $1,000 in ServiceNow right now?
Before you buy stock in ServiceNow, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ServiceNow wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $660,341!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $874,192!*
Now, it’s worth noting Stock Advisor’s total average return is 999% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of June 9, 2025
Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Adobe, Atlassian, Palantir Technologies, Salesforce, ServiceNow, Snowflake, and Workday. The Motley Fool has a disclosure policy.
