Veeva Systems: Buy This Growth Machine
Summary
- VEEV's share price is breaking out higher.
- It continues to deliver strong fundamental growth.
- I am buying stock with a $68 stop-loss point.
Veeva Systems (NYSE:VEEV) is breaking out higher on strong fundamental growth. The combination of fundamental growth leading its share price higher is a positive long-term trend. VEEV is expanding internationally, with highly developed life sciences technology, potentially becoming a leader in future drug development technology. The company's share price is breaking out higher to record levels, and continues to show strong upward momentum. I am buying stock with a tight $68 stop-loss level should my thesis be proven incorrect and investor sentiment wanes.
Price Action
VEEV's share price is trending strongly higher on improved fundamental results. The company continues to impress on top- and bottom-line growth, which is leading to equally impressive price action. On both its short- and long-term charts, VEEV looks strong. On its monthly-chart, the company is breaking out to record high levels. This comes after a recent consolidation and breakout following positive earnings results.
On shorter-term charts, VEEV's breakout above $68 was significant. This level had acted as significant resistance in recent months, but price action moved well above this level on strong investor momentum. I am setting a stop-loss level at $68, expecting this stock to continue to run higher.
Source: Trading View
Fundamental Narrative
VEEV continues to impress investors with stronger top- and bottom-line revenue due to expanding international growth in its cloud-based services. Over the most recent quarter, total revenue came in at $185 million, up 23% year-over-year. The was led by subscription revenue growth of 26%, with operating margins at 28%. Growth was largely driven by progress in each of its markets, as well as continued innovation overseas.
The company's cloud technology continues to show strong commercial growth. VEEV's commercial cloud is a suite of multi-channel customer relationship management applications, which allow pharmaceutical and biotechnology companies to target and support sales and marketing to physicians, other healthcare professionals, and healthcare organizations through various touch points, including in-person, email, and online. In the most recent quarter, this was highlighted as two top 10-pharmas committed to expanding their use of Veeva CRM in emerging markets, including Latin America and Asia Pacific, according to management.
The roll-outs are projected to happen over the next 12 to 18 months. Both partnerships are long-standing Veeva CRM customers who started with them in the U.S.
Global demand for improved healthcare and life science services are aiding VEEV's business model. Management recently stated that its global progression is consistent with the trend of greater global harmonization and standardization on its systems. The company can therefore aid in creating a more efficient environment for IT organizations, enabling consistent engagement channels around the world and set its customers up with a solid commercial technology foundation as they look to leverage more digital engagement in the future, according to management.
Additionally, the company's Vault platform also continues to deliver strong returns. VEEV's Vault is a cloud-based enterprise content management platform and suite of applications for managing commercial functions, including medical, sales, and marketing, as well as research and development functions, such as clinical, regulatory, and quality.
The most recent quarter was the first time VEEV had double-digit customer additions in every area of Vault: clinical, quality, regulatory, and commercial, according to management. This is an indication of the momentum seen in each of these markets, as well as the emergence of Vault as a strategic platform for life sciences.
VEEV is uniquely positioned to help streamline drug development since its the only technology provider with best-in-class application suites across each of the major areas of development; including clinical, quality, and regulatory. If the company is able to become the choice technology aiding in streamlining drug development, future growth potential could be enormous. With VEEV already cutting out its niche in cloud-connectivity, the company looks to be on its way to achieving such as distinction.
Below is a chart of VEEV's revenue, earnings per share, and price per share. What is seen is that all three metrics are following a similar trajectory higher, signaling that strong operational performance is driving its share price higher. With all three metrics growing exponentially, and market opportunities still developing for VEEV, continued investor sentiment should drive this share price higher in coming years.
Conclusion
VEEV is breaking out higher on strong fundamental growth. Its combination of fundamental growth leading share price growth higher is a positive long-term trend. VEEV is expanding internationally, with highly developed life sciences technology, potentially becoming a leader in future drug development. The company's share price is breaking out higher to record levels, and continues to show strong upward momentum. I am buying stock with a tight $68 stop-loss level should my thesis be proven incorrect and investor sentiment wanes.
This article was written by
Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Comments (5)
Only been only been public since 2013 and is getting major traction.
Definitely worthy of a watch and buy on any weakness.
Love this one.
With stock at $76 today I am assuming your wrote this a few days ago and just published.
Margins over next 24 months may exceed your and consensus expectations. Scale from several initiatives, cross selling and increase of average new orders will add 200-300 points?
The upcoming Philly meetings may well surprise who is in audience and some of the new verticals being entered. Look and read the name tags. TAM much larger than cynics believe. International will see a much bigger push and pull in 2019. Certainly volatility given high near term P/E BUT cash on the balance sheet, pending customer announcements in clinical and International can take us to over $100 in next 36 months. IMHO