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Veeva Systems - Addressing The Growth Premium

Mar. 06, 2018 3:27 PM ETVeeva Systems Inc. (VEEV)4 Comments
Michael Hauck profile picture
Michael Hauck


  • VEEV's focused product offering has allowed it to rapidly accumulate marker share in the life sciences application market.
  • There are early indications that Veeva has started to develop competitive advantages through network externalities and customer captivity.
  • Entry into additional markets will expand the Total Addressable Market which will allow Veeva to realise its current market value.

Veeva Systems (NYSE:VEEV) provides cloud-based software services to companies within the life sciences industry. The company's solutions help life sciences companies streamline their operations across the entire product life cycle - from product development to commercialisation. Their solutions address a range of needs including multichannel customer relationship management, content management, master data management, and customer data. In addition to their online services the company provides consulting services to firms within the life sciences industry.

Industry Trends

VEEV operates within the global life sciences software application industry. In 2016 it was number two in market share with 6.7% of the overall market - SAP (SAP) was the market leader at 8.0%. VEEV's focused approach has allowed it to rapidly accumulate market share and I see this trend continuing going forward. The industry is highly fragmented with the top 10 companies accounting for 45.0% of total market share. VEEV's superior product offering should allow them to consolidate the fragmented bottom end of the market going forward, presenting a strong growth opportunity for the firm.

One of the main risks that VEEV is facing is the slow growth rate of the global life sciences software sector. The industry's CAGR is forecast to be 2.5% over the next 5 years. Under these circumstances, if VEEV was able to consolidate as much as 30.0% of the total market then using a bullish DCF model, the share should be around $50-$55. The share price at market close 2nd of March 2018 was $73.77, making VEEV look grossly overvalued in this scenario.

As with all technology firms, investors need to factor in more than just the current market environment and look at possible paths of disruption. A clear example is that of Facebook (FB) where many investors did not factor in that they were not only operating within the online advertising

This article was written by

Michael Hauck profile picture
Long term growth investor focused on technology and life sciences companiesThe views expressed are solely my own and not related to those of my employer.

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.

The views expressed in this article are solely my own and not related to those of my current or previous employers.

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Comments (4)

baseball2017 profile picture
What NikSurfs said.
Niksurfs profile picture
As they expand into other verticals like cosmetics, chemicals and more... the TAM for this company is going to grow exponentially. The runway for this company, the culture and their carefully laid out plans for expansion and growth put them far ahead of what can be presently calculated. They are planning well, marketing well and executing at the top of their game.

IMO - They deserve the premium and yes there will be air pockets along the way, but they are doing a lot of things right and I am holding this one long term.

Beautiful job guys, Keep up the "Veeva way" it is working and holders / investors are going be even more handsomely rewarded, as this star continues to cross the sky.
I will buy more at 70.00. Sorry I sold mine at 58. Made money but I chocked and sold to Soon.
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