How could delayed closings of big on-premise deals affect Morgan Stanley?
Morgan Stanley may revise financial coverage for ServiceNow amid revenue slowdown The delays in closing large on-premise deals in the Middle East have pressured ServiceNow's revenue outlook, leading to a sharp decline in its stock value. As an investment bank, Morgan Stanley covers ServiceNow and must adjust its financial analysis and ratings in response to this weakened guidance. Specifically, management guided for fourth-quarter growth of just 18.5% in current remaining performance obligations (cRPO), a slowdown that contributed to the stock dropping sharply.
- Effect
- Mild negative
- How direct
- Brind's reasoning
- When
- Within weeks
- The story
- No new developments lately
How it reaches Morgan Stanley
-
ServiceNow shares dropped sharply, falling about 25% from Wednesday's close of $150.13. The company reported strong third-quarter subscription revenue, which climbed 21% year over year to $3.99 billion. The stock decline followed the company's guidance for fourth-quarter growth of just 18.5% in current remaining performance obligations.
The full event1independent outlet -
The resulting slowdown in growth and the sharp drop in ServiceNow's stock price, which fell about 25% from Wednesday's close of $150.13, requires investment banks like Morgan Stanley to revise their financial coverage and ratings for the company.
No report states this step directly. Brind drew it from the reporting on each side of it, so treat it as an informed guess.
-
U.S. investment bank
Everything about Morgan Stanley
Tap any step to see the evidence behind it.
The facts so far
As reported. Each one links to where it comes from.
- Delayed closings of big on-premise deals in the Middle East hurt first-quarter subscription revenue.fool.com
- ServiceNow guided for fourth-quarter growth of just 18.5% in current remaining performance obligations (cRPO).fool.com
- ServiceNow's shares were near $112, down about 25% from Wednesday's close of $150.13.fool.com
Why it matters
For Morgan Stanley, maintaining accurate financial coverage and ratings is central to its advisory business. A significant, reported slowdown in a major tech client like ServiceNow requires immediate analysis and potential downgrades, which affects the bank's reputation and the advice it provides to institutional clients.
This situation highlights the sensitivity of large enterprise software companies to geopolitical risk. While ServiceNow has a history of beating its guidance, the current slowdown, attributed to Middle East tensions, shows that even strong performers are vulnerable to external regional instability.
What we don't know yet
- Will ServiceNow be able to accelerate deal closings to meet or beat the 18.5% cRPO guidance?
- How long will the current geopolitical tensions in the Middle East persist?
What would change this answer
Who else could feel it
Other possible ripples from the same event.
Reporting
- fool.comThursday
Keep going
Brind's analysis is written by AI from the reporting linked above and can be wrong. This explainer is a possibility worth considering, not a forecast: steps marked as Brind's reasoning are not stated in the reporting. It is not investment advice; do your own research.