Veeva Systems Quarterly Checkup
We take a look at how the life sciences leader is doing as it moves into middle age.
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Veeva Systems For Dummies
by Abhishek Singh
If you were to ask Google or Bing or ChatGPT about Veeva Systems Inc., ( VEEV 0.00%↑ ) they would likely throw up the sentence: “Veeva is a leading global provider of industry-specific, cloud-based software solutions for the life sciences industry”. To truly grasp the breadth of its activities, visit the company's website. There, you will come across a set of words: Clinical, Regulatory, Quality, Safety, Medical, Commercial—essentially, the 'nuts and bolts' of the life sciences industry. Veeva's product solutions are integral to the core operations of the life sciences industry.
Furthermore, when you consider its service offerings (business consulting, commercial analytics, training, etc.), it becomes evident that Veeva operates as a broad and resilient business. Once customers have adopted its products, the motivation to remain with Veeva is substantial due to switching costs, technical complexity, and potential disruptions or delays.
The company heavily invests in R&D, allocating 27% of its revenue in Q2 FY1/24, which enables it to continuously develop new products. Their sales and marketing expenses, as a percentage of revenue, have remained stable for several quarters, indicating that they don't need to increase spending to attract customers. Gross margins have held steady for several years.
Veeva's products are designed to streamline processes within customer companies, which is an ideal and desirable scenario. However, adopting such systems is not straightforward due to associated costs and complexity. If you are an executive in the life sciences industry facing a challenging macro environment, you might postpone the switch to a Veeva product for a quarter or two without significantly impacting your business. While switching may be desirable, it is not immediately mandatory. It's not surprising that the drop in Veeva's revenue growth has coincided with QT.
Nevertheless, the company is richly valued, which is likely due to its monopolistic position (we called VEEV a monopoly stock in 2019) and a wide moat. But that has always been the case and unless the revenue growth really grinds down due to systemic problems in company, it will likely continue to attract high valuations.
Let’s take a look at the fundamentals, the valuation, technical analysis and where we think the stock may be headed.