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Reasons to Retain Veeva Systems Stock in Your Portfolio Now

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Veeva Systems Inc. (VEEV - Free Report) is well-poised for growth in the coming quarters, courtesy of its strong product portfolio. The optimism, led by a solid second-quarter fiscal 2025 performance and strategic deals, is expected to contribute further. Stiff competition and rising operational costs persist.

This Zacks Rank #3 (Hold) company’s shares have gained 8% in the year-to-date period compared with 20.9% growth of the industry. The S&P 500 Composite has risen 20.2% during the said time frame.

The renowned provider of cloud-based software applications and data solutions for the life sciences industry has a market capitalization of $34.17 billion. The company projects 24.4% growth for the next five years and expects to maintain its strong performance in the future. It delivered a trailing four-quarter average earnings surprise of 5.41%.

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Reasons Favoring VEEV’s Growth

Strong Q2 Results: Veeva Systems’ solid second-quarter fiscal 2025 results buoy optimism. The uptick in the overall top line and bottom line and robust performance by the Subscription services segment during the quarter were impressive. In the fiscal second quarter, Veeva Systems’ gross profit improved 20.1% to $505.8 million. The gross margin expanded 340 basis points (bps) to 74.8%.

Robust Product Portfolio: We are optimistic about Veeva Systems’ unique solutions, which include Veeva Vault, Veeva CRM (customer relationship management), Veeva Network and Veeva OpenData.

Veeva Systems continues to expand its product portfolio with new launches. In August, the company reached a significant milestone on its path to connect sales, marketing, medical, and service to enable true customer centricity with the release of Vault CRM Service Center.

Veeva Systems also added 14 new Vault CRM customers in the fiscal second quarter. The company also commented on the latest release of Veeva Site Connect, which is part of the Veeva Clinical Platform. Veeva Site Connect plays a critical role as the industry moves to simplify and standardize site collaboration, and seven of the top 20 biopharmas have already adopted Veeva Site Connect to streamline trials.

Also, in clinical, Veeva Clinical Database (CDB), a significant innovation in clinical data, has been selected by seven top 20 biopharmas to reduce manual query work and increase speed and efficiency in trials.

Strategic Deals: We are upbeat about Veeva Systems’ recent few collaborations. In June, the company announced a partnership with Vita Global Sciences that is likely to help the latter improve its clinical data management processes, as well as collaborations with key trial stakeholders. The latest adoption of Veeva Vault electronic data capture (EDC), part of the Veeva Clinical Platform, is likely to provide a boost to the Veeva Development Cloud business.

In June, the company also declared that Hangzhou Tigermed Consulting Co., Ltd. had selected Veeva Vault EDC as its technology foundation for modern EDC.

Factors That May Offset the Gains for VEEV

Stiff Competition:  Veeva Systems operates in a highly competitive market. In new sales cycles within the company’s largest product categories, it competes with other cloud-based solutions from providers that make applications geared toward the life sciences industry, like IQVIA Inc. The company’s Commercial Cloud and Veeva Vault application suites also compete to replace client server-based legacy solutions offered by companies such as Oracle, Microsoft Corporation, and other smaller application providers.

Rising Costs: VEEV has been incurring huge operating expenses in recent months. Sales and marketing expenses for the second quarter of fiscal 2025 increased 4.7% year over year. Management anticipates a further increase in these expenses throughout fiscal 2025. This is mainly due to employee-related costs as the company expands its workforce to bolster sales and marketing efforts for its product offerings and to continue growing its sales capacity across all solutions. In the fiscal second quarter, the total operating expenses increased 6.9% year over year. 

Estimate Trend

Veeva Systems is witnessing a stable estimate revision trend for fiscal 2025. In the past 30 days, the Zacks Consensus Estimate for earnings has moved north to $6.23 per share.

The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is pegged at $683.7 million, indicating a 10.9% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and ABM Industries (ABM - Free Report) . While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.

Universal Health Service has gained 56.1% compared with the industry's 48.1% rise so far this year.

Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.

Quest Diagnostics shares have gained 13.9% so far this year compared with the industry’s 17.9% rise.

ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.

ABM's shares have risen 27.4% so far this year compared with the industry’s 17% growth.

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