Veeva Successfully Leveraging Dominant Position in CRM Says Goldman in New Bullish Recommendation

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By Sam Boughedda

Goldman Sachs analyst Gabriela Borges initiated Veeva Systems (NYSE:VEEV) with a Buy rating and a price target of $253, representing a potential 35% upside.

In a note to clients, Borges said Goldman Sachs views Veeva as a long-term compounder because of its competitive moat and exposure to technology adoption in Life Sciences.

"We believe the company is successfully leveraging its dominant position in CRM to cross-sell CRM add-ons and finance its efforts to expand into software for R&D use cases, where we expect to see increasing momentum over the next 2 years," commented Borges. "While we recognize the risk of seat count in CRM going down due to pharma companies reducing their salesforces, our bottom-up analysis suggests that the biggest impact is likely already in Veeva’s model and priced in to the stock (Veeva has underperformed vertical peers by ~16% since it announced this dynamic and 2022 sales estimates were flat vs. positive revisions for peers)."

The analyst pointed to medium-term drivers of the stock as being commercial products Crossix and Data Cloud in the Commercial segment and the clinical data management suite product cycle in the R&D segment.

"We view Veeva’s financial model as particularly resilient in the current macro environment. Our bottom-up analysis of sales and marketing spend at pharma companies suggests limited year to year volatility; and while R&D trends are more negative, Veeva has low penetration today and can benefit from secular growth. Coupled with the stock trading at 28x 2023 FCF (vs. vertical peers at 36x) despite a better Rule of 40 profile (~55 vs. peers at ~35), we see compelling risk/reward."