Veeva Impresses With Q3 Performance, Transition off Salesforce Could Yield Meaningful Savings, Analysts Say

  • Needham analyst Ryan MacDonald maintained Veeva Systems Inc VEEV with a Buy and raised the price target from $205 to $220.
  • The re-rating followed Veeva's solid Q3. VEEV delivered a nice upside to billings, revenue, and EPS. 
  • R&D was the driving force, with CTMS delivering its largest bookings quarter. 
  • However, the news of the day focused on Veeva's core CRM, as the company announced its intent to end its relationship with Salesforce, Inc CRM when the contract comes up for renewal in 2025. 
  • While the fundamental effects of this decision have no impact on the company's 2025 targets, he believes the migration of CRM to the Vault platform creates long-term gross margin upside (500bps+). 
  • In the interim, he was confident Veeva could maintain its market-leading position in commercial and its healthy growth trajectory in R&D, which he expected to result in a Rule of 40+ fundamentals.
  • Raymond James analyst Brian Peterson reiterated his Outperform rating on VEEV and cut his price target from $225 to $215.
  • The re-rating followed Q3 results that topped his model, although the modest upside and slightly below consensus Q4 outlook suggests the environment has not materially improved. 
  • Positively, Veeva continues to gain momentum across its R&D portfolio with impressive new wins in both Clinical and Quality, including encouraging progress with CTMS, EDC, and Safety. 
  • While there will be natural questions about the company's move from Salesforce to Vault for the CRM offering, the company has an extended period to transition customers, with the potential to save ~$80 million currently paid for access to the platform. 
  • While this may take time to digest, he thinks the move to a single platform should drive savings and increased product adoption over time. 
  • He views the pullback in shares after hours as a buying opportunity.
  • Price Action: VEEV shares traded lower by 7.70% at $176.68 on the last check Friday.
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