NEW YORK (AP) -- Shares of ServiceNow Inc. took a hit Monday after a UBS analyst downgraded the recently-public software company, saying its stock is too expensive.
THE SPARK: Analyst Brent Thill downgraded ServiceNow to "Sell" from "Neutral," but left his $28 target price unchanged. He said the reason was "valuation," meaning the stock was trading at too high a price.
ServiceNow, which makes software that automates companies' technology operations, went public in June at $18. Shares closed Friday at $38.68.
ANALYSIS: Thill said he doesn't question ServiceNow's business, which is poised to "disrupt" the market and has a leadership with a strong track record. But he thinks investors are "are paying too much, too soon for potential success."
Thill expects ServiceNow to post a loss for the year of $23 million, or 19 cents per share, and post a profit of $2 million, or a penny per share, for 2013.
That compares with an average estimate of analysts surveyed by FactSet for a loss of $32 million, or 20 cents per share, for 2012. For 2013, analysts' average forecast is for a loss of $12.8 million.
BACKGROUND: ServiceNow is among a handful of business-focused tech companies that have gone public in the past year in Facebook's shadow, but have done much better on the stock market. Others include Palo Alto Networks Inc. and Splunk Inc.
SHARE ACTION: Shares fell $2.20, or 5.7 percent, to close Monday's session at $36.48, after earlier dropping as low as $34.62. The stock has traded between $22.62 and $41.77 since it debuted on June 29.