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Reasons to Hold on to Veeva Systems (VEEV) Stock For Now

Investors continue to be optimistic about Veeva Systems (VEEV) on its slew of product launches and robust product adoptions.

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This story originally appeared on Zacks

Veeva Systems Inc. VEEV is well poised for growth in the coming quarters, backed by its robust product adoption. A solid performance in the second quarter of fiscal 2022 and a slew of product launches also buoy optimism on the stock. However, foreign exchange instability and a tough competitive landscape are major downsides.

- Zacks

Over the past year, this Zacks Rank #3 (Hold) stock has gained 4.6% compared with 7.9% growth of the industry and 32% rise of the S&P 500.

The renowned provider of cloud-based software applications and data solutions for the life sciences industry has a market capitalization of $44.21 billion. The company projects 18.2% growth for the next five years and expects to witness continued improvements in its business. Veeva Systems surpassed the Zacks Consensus Estimates in all the trailing four quarters, delivering an earnings surprise of 13.85%, on average.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s delve deeper.

Robust Product Adoption: Veeva Systems has been registering solid uptake for its products over the past few months. The company, in September, announced that global medical products company ConvaTec has selected Veeva Vault CDMS to provide electronic data capture, coding and data cleaning for their upcoming study on the detection of wound infections. The same month, Veeva Systems announced that Emmes (a global full-service clinical research organization) is standardizing on Veeva Development Cloud applications throughout functional areas in order to achieve better speed and compliance.

In August, Veeva Systems had announced that the Veeva Vault Clinical Operations Suite was selected by B. Braun SE with the aim of updating study management and payments to partner sites.

Product Launches: Veeva Systems has been actively working toward strengthening its product portfolio with new offerings, raising our optimism. The company, in September, announced a new cloud application — Veeva Vault LIMS — with the aim of modernizing quality control lab operations. The same month, Veeva Systems announced a new application — Veeva Vault Validation Management — which will enable more efficient and cost-effective validation lifecycle management.

Strong Q2 Results: Veeva Systems’ better-than-expected results in second-quarter fiscal 2022 instill confidence on the stock. Both of the company’s segments performed impressively during the quarter. The company continues to benefit from its flagship Vault platform, which is encouraging. Revenue uptick in Veeva Commercial Cloud with 21 new Veeva customer relationship management (“CRM”) customer wins and good traction with Veeva CRM add-ons (Crossix, and Veeva Link) look impressive. Strength in Veeva Systems’ data business and Veeva OpenData raises our optimism. Expansion of both margins also bodes well. A raised guidance for the fiscal year is a major positive.

Downsides

Forex Woes: Veeva Systems derives a major share of its revenues from international operations. Some of its international agreements provide for payments and the majority of its local costs being denominated in local currencies. As the company continues to expand its operations in countries outside the United States, an increasing proportion of its revenues and expenditures in the future may be denominated in foreign currencies. Fluctuations in the value of the U.S. dollar versus foreign currencies may impact its operating results.

Stiff Competition: Veeva Systems operates in a highly competitive market. In new sales cycles within the company’s largest product categories, it competes with other cloud-based solutions from providers that develop applications for the life sciences industry. The company’s Commercial Cloud and Veeva Vault application suites also vie to replace client server-based legacy solutions offered by its rivals.

Estimate Trend

Veeva Systems has been witnessing an upward estimate revision trend for 2022. Over the past 90 days, the Zacks Consensus Estimate for its earnings per share has moved 1.7% north to $3.56.

The Zacks Consensus Estimate for the company's third-quarter fiscal 2022 revenues is pegged at $464.9 million, suggesting a 23.2% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Henry Schein, Inc. HSIC, IDEXX Laboratories, Inc. IDXX and West Pharmaceutical Services, Inc. WST.

Henry Schein’s long-term earnings growth rate is estimated at 13.9%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IDEXX’s long-term earnings growth rate is estimated at 19.9%. It currently has a Zacks Rank #2.

West Pharmaceutical’s long-term earnings growth rate is estimated at 27.3%. It currently carries a Zacks Rank #2.



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