1,432 Reasons to Buy This Healthcare Cloud Stock

Veeva Systems (NYSE:VEEV), a software solutions provider for the life sciences industry, has seen some weakness amid the slowdown in cloud market demand as organizations cope with macro woes.

While the company saw its shares slumping by around 32% over the past three years, the stock is gaining back momentum, with encouraging financial reports showing strength.

The stock has gained around 8% this year and it has not disappointed investors who held over the long haul, delivering nearly 630% returns over the past decade.

So what does the future hold for Veeva? Where is it headed over the next decade?

Key Points

• Veeva Systems operates in the fast-growing life sciences industry, with cloud spending projected to grow at a 23% CAGR through 2028. 
• Revenues rose 15% year-over-year, with net income up 53%, consistently beating Wall Street estimates and regaining stock momentum.

Veeva Sits In a Market Primed For Fast Growth

According to the International Data Corporation, the Life Sciences industry is expected to be among the fastest growth ones thanks to cloud spending acceleration through 2028 of around 23% CAGR. This offers a glimpse into the huge market opportunity for Veeva Systems and hints at the growth that may be around the corner.

Management assess the company’s total addressable market in the life sciences industry to be $20 billion while MedTech and Biopharma combined add up to a $2 trillion market. Veeva has only made a small dent in its TAM to-date, suggesting the future may be even brighter.

1,432 Reasons to Buy Veeva?

Veeva Systems breaks down its opportunities into 3 areas, which are Veeva Development Cloud and Veeva Commercial Cloud, and one more platform known as Veeva Data Cloud. These relate to pharma, biopharma, and the medical devices industry, as well as to research and marketing segments.

The company serves 1,432 customers across the life sciences industry and they range from pharmaceutical and biotechnology to medical device organizations as well as contract sales and research companies.

Some of Veeva’s clients include Bayer AG, Eli Lilly, Gilead Sciences, and Novartis, among others, while on the emerging companies’ side, Alkermes, Alnylam Pharmaceuticals, and Idorsia Pharmaceuticals are also served. Even the consumer products industry is served by Veeva to some extent.

Top Line Growing Impressively 

Last quarter, total revenues came in at $676.2 million, an increase of 15% year over year, while subscription services revenues rose 19% year-over-year to $561.3 million.

Management reported net income on a GAAP basis of $171.0 million, compared to $111.6 million in the prior year’s quarter, representing an increase of 53% year-over-year. Non-GAAP net income increased by 35% year over year to $267.3 million. More good news flowed with non-GAAP net income per share coming in at $1.62, compared to $1.21 in the year-ago quarter.

The company’s revenue and EPS for the second quarter were better than the forecasted guidance and topped Wall Street estimates for the trailing four quarters.

Where Will Veeva Systems Stock Be in 10 Years?

Veeva Systems is expected to climb to $243 per share, a 19% increase from present levels, over the next 10 years according a discounted cash flow forecast analysis.

Analysts peg fair value closer to $233 per share, though the range of estimates is wide from $173 per share at the low end to $281 per share at the high end.

It certainly appears that Wall Street is increasingly leaning bullish with 22 of the 27 covering the stock upgrading their earnings forecasts for the coming period.

New buyers should probably be cautious though because the price-to-earnings multiple of 53x is elevated and particularly when contrasted with forecasted 5-year net income growth of 25%. Still, cash flows are strong and in recent years nearly approach the billion dollar level annually.

Veeva’s fundamentals and prospects should support it perform steady growth over the coming decade and its history of low volatility offer an attractive alternative to conservative-minded investors looking for some diversification from headline stocks in the tech industry, yet wanting exposure to cloud-based technology solutions.