ServiceNow (NOW) is facing a favorable Q4 earnings setup amid "good performance" and "strong commentary," Oppenheimer said in a note Wednesday.

However, the company is also facing stock sentiment headwinds in the near term despite healthy fundamentals and artificial intelligence trends, the note said.

Oppenheimer said the company is "not a cheap stock and investors tend to lower multiples for software companies that embark on an M&A spree" like ServiceNow did in Q4.

ServiceNow's acquisition spree may raise concerns about the "durability of fast subscription revenue growth" as well as its free cash flow, the note said, adding it may also weigh on investors' willingness to underwrite the company's growth until M&A deal synergies emerge.

Oppenheimer lowered ServiceNow's price target to $175 from $200, citing lower group multiples, while keeping its outperform rating on the company.

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