Veeva Systems Stands On The Brink Of Opportunity, Meriting Analyst Upgrades

Veeva Systems IncVEEVearnings on Thursday. Bank of America's Brad Sills commented in a research report that his prior view on Veeva's stock was valuation based, but the earnings report was good enough to warrant an upgrade.

Analyst Commentary

Sills explained that the provider of cloud-based software solutions for the life sciences industry has now shown a 27 percent-plus growth in billings in the past two quarters which now gives him "greater confidence" that the company is in the early stages of a multi-billion-dollar revenue opportunity with Vault. In fact, the analyst sees Veeva's Vault opportunity in both the large pharmaceutical installed base (which presents an additional $400 to $500 million revenue opportunity) along with life sciences start-ups, which was previously un-addressed.

Sills also noted that commercial could also sustain a "health" mid-teens growth rate due to: 1) cross selling of PromoMats, 2) cross-selling CRM add-ons, 3) expansion in the already existing installed base and 4) new customer wins intentionally, especially in Japan and Europe.

Finally, the analyst explained that his new $70 price target represents a 42x EV/FCF multiple on his 2018 estimates which is "reasonable" relative to the analyst's estimated three-year FCF compounded annual growth rate of 30 percent, which is likely to be proven conservative.

At time of publication, shares of Veeva were up 6.33 percent at $65.65.

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