Suhail Capital Goes Long Former Favorite Short Veeva Systems

Suhail Capital initially presented a short thesis on Veeva Systems Inc VEEV back in November 2013. The investment firm issued multiple follow ups since then which reinforced their views on the company.

However, Suhail Capital switched courses on Thursday and is now "long our former favorite short."

Suhail Capital's short thesis was based on several assumptions, namely: 1) outside of Life Sciences CRM, Veeva's "nascent" operations in Content Management and MDM were "completely unproven," 2) Veeva's success in CRM came at the expense of Siebel Life Sciences in the U.S., 3) 2 of the world's largest pharmaceutical giants (accounting for 20 percent of the market) were using competing platforms, 4) DirectForce.com's customization was a "majorly overlooked threat" to Veeva's entire business model, and 5) the stock's valuation was elevated due to the "overall SAAS hype."

"Two years later we can humbly say that on the first four points Veeva has proven us wrong, and as far as the fifth point goes the market has gradually taken care of that," Suhail Capital stated.

The report continued that Veeva "started to have immense success" with its Vault product line as it is approaching a $100 million annual run rate. Meanwhile, the company's progress in Network continues to "chip away" while Veeva Open Data is "being taken more seriously" in the customer reference data market.

"Putting this altogether one has to give management credit for proving that they can compete and thrive outside of CRM in a very short time," the report further argued. "At the same time, you also have to appreciate just how poorly priced the shares where at IPO when the nonCRM business was a total unknown."

Bottom line, Veeva's prospects and outlook moving forward have "significantly reduced" the downside risk in its stock.