Veeva Systems, a cloud software provider catering to healthcare and life sciences industries, experienced a significant surge in its stock value, up 9% at 12:44 p.m. ET. The rally can be attributed to Veeva’s robust earnings report, surpassing analysts’ expectations, and providing positive guidance for the upcoming quarter.
An overview of Veeva’s performance
Despite not being a top performer in the technology sector this year, Veeva stock saw a 3.5% increase year-to-date before the recent report. However, it was down by 42% from its 2021 peak, reflecting a correction from the inflated valuations seen in the software industry. Following the earnings announcement, Veeva reported a 15% revenue growth in the quarter. More notably, the subscription component of the revenue, constituting 83% of the total revenue, exhibited a robust 19% growth. The adjusted earnings per share also showed a significant increase of 33% to $1.62, highlighting improved operational efficiency translating into higher profitability.
Looking ahead, Veeva anticipates Q3 revenue in the range of $682 million to $685 million, with adjusted EPS forecasted between $1.57 and $1.58. While the top-line projection slightly missed estimations, the bottom-line guidance surpassed expectations. CEO Peter Gassner emphasized strategic victories during the quarter, setting the stage for further expansion. Notably, Veeva’s success in securing CRM deals was highlighted, indicating a strong competitive position in the market.
Assessing Veeva as a software investment
Amidst a backdrop of software stocks trailing hardware tech equities this year, Veeva presents itself as a potential opportunity in the software sector. Trading at around 32 times the adjusted earnings estimates for fiscal 2026, Veeva’s valuation appears reasonable for a profitable business with a significant focus on recurring subscription revenue. The company’s strong bottom-line growth coupled with expectations of decreasing interest rates further enhance its investment appeal.
Furthermore, Veeva boasts a substantial cash reserve of approximately $5 billion with no outstanding debt, constituting 16% of its market capitalization. This financial strength not only provides a cushion but also underscores the stock’s attractiveness from a value perspective. In conclusion, Veeva Systems emerges as an appealing software investment, poised for potential growth even after the recent upswing.
Disclaimer: Billy Duberstein and/or his clients do not hold any positions in the mentioned stocks. The Motley Fool has disclosed its positions and recommendations related to Veeva Systems.
