KeyBanc: Veeva Systems Is A Core Holding In The Cloud Space

Veeva Systems Inc VEEV reported third-quarter results Tuesday that included a top- and bottom-line beat and encouraging guidance for the coming fiscal quarter and next year.

The Analyst

KeyBanc Capital Markets' Brent Bracelin maintains an Overweight rating on Veeva Systems' stock with an unchanged $70 price target.

The Thesis

Veeva's earnings report was highlighted by 23-percent revenue growth from a year ago, while Vault revenue rose 50 percent over the same time period, Bracelin said in a research report. (See Bracelin's track record here.) 

Vault remains the "primary growth engine" and contributes to the company's investment profile as a core cloud holding stock that can justify a premium valuation, the analyst said. 

Bracelin said other notable aspects of Veeva's earnings report include: 

A major contract win with a top-20 pharmaceutical firm in Japan that could potentially open the door for more opportunities in the country. 

A sequential improvement in operating margin to 32.7 percent.

Free cash flow per share of 24 percent that outpaced revenue growth.

Veeva showed that its QualityOne opportunity has "untapped" potential, and incremental clinical expansion could help sustain subscription revenue growth above 20 percent on top of its already best-in-class operating margin of more than 30 percent.

Price Action

Shares of Veeva were trading lower by nearly 5 percent ahead of Wednesday's market open after gaining more than 40 percent since the start of 2017.

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