As Veeva's Opportunity Expands, Expect The Stock's Multiple To Do The Same

Veeva Systems Inc VEEV shares were up 7.7 percent Friday after the company reported operating income, revenue and guidance that handily topped Wall Street expectations. But even after the big move, Veeva shares may still have some upside remaining in the months ahead.

Veeva Vault's Momentum And Product Pipeline

The cloud-based software solutions company maintained its positive momentum with Veeva Vault, which accounted for 36 percent of total revenue in the first quarter, up from only 29 percent a year ago. “Veeva is experiencing especially strong momentum across its new clinical suite, with an existing top 20 pharma customer expanding beyond Promomats, eTMF and other products and standardizing all regulatory content on Veeva’s RIM suite,” said Pacific Crest analyst Brent Bracelin. The company demonstrated that it has strength outside of the life sciences, Bracelin said.

Revenue from these deals may not be initially visible in the company’s results, but Bracelin said it could contribute to multiple expansion for the stock in the near term.

Beyond Best In Class

Not only is Veeva a best-in-class SaaS play, its vertical reach and differentiated software have allowed company to steal market share from legacy vendors, the Pacific Crest analyst said.

“In addition, because it sells to a relatively small audience of large life sciences customers, its customer acquisition costs are lower than those of other SaaS peers."

Pacific Crest projects Veeva should be able to maintain EBIT margins above 25 percent and grow revenue at greater than 25 percent annually for the foreseeable future.

The firm maintains an Overweight rating for Veeva and has raised its price target for the stock from $61 to $70.

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