Veeva Stock Forecast: Cloud computing has passed from being a tech buzzword to a best practice for businesses of all sizes and industries. According to RightScale’s 2019 “State of the Cloud” report, 94 percent of organizations are currently using cloud computing in some form or fashion.
When businesses migrate to the cloud, they trade their on-premises software and hardware for the same resources provisioned to them remotely over the Internet.
The cloud provider is responsible for hosting, maintenance, and support of this infrastructure. Cloud computing provides benefits such as greater flexibility and scalability, lower costs, and disaster recovery and business continuity.
Some cloud providers offer services to the general public, while others are focused on specific use cases. Veeva [NYSE: VEEV] is a technology company that provides cloud computing solutions for the pharmaceutical and life sciences industries.
Veeva stock has had an excellent year thus far, with shares rising from $90 in January to their peak of $170 in July. Indeed, the price of Veeva stock has continued to increase ever since the company’s IPO in 2015 at $20. What’s driving this dramatic growth for Veeva, and will the good news continue for Veeva investors?
What Does Veeva Do?
Veeva [NYSE: VEEV] is a U.S. technology company that offers cloud-based data management and customer relationship management (CRM) cloud software to clients in the pharmaceutical and life sciences industries.
Headquartered in Pleasanton, California, Veeva was founded in 2007 by Matt Wallach and Peter Gassner, the latter of whom currently serves as the company’s CEO.
The main competitors of Veeva include other providers of cloud-based software for healthcare and life sciences, such as Salesforce (which offers the Salesforce Health Cloud patient management software) and Data+ Research (which offers a data management solution for clinical research in healthcare and life sciences).
Veeva offers a comprehensive suite of cloud-based software for life sciences companies.
Its flagship offering is its CRM software suite for managing sales and marketing interactions with healthcare professionals.
The company also offers the Vault Development Cloud, which integrates applications for clinical data management, clinical operations, quality management, regulatory information management, and safety management.
Is Veeva Stock a Buy?
It’s easy to look at the price graph of Veeva stock, especially 2019 to date, and see an appealing opportunity for investment. Shares of Veeva grew by 74 percent between January and June 2019 alone.
Part of this strong performance can be explained by Veeva’s dominance of the cloud computing market in its niche. The company’s CRM solution has already achieved 80 percent adoption among the global pharmaceutical industry.
With this market reaching saturation, Veeva is also investing heavily in other popular offerings such as its Vault content management suite, which is now responsible for nearly half of the company’s revenue.
The Vault suite was the main driver of subscription revenue in Q1 2019, which increased by 27 percent – the company’s highest growth rate in seven quarters.
Veeva [NYSE: VEEV] is also concentrating on other life sciences cloud solutions like Nitro, a cloud-based commercial data warehouse product announced in May 2018.
Data warehouses are centralized repositories where a company’s data is collected and processed, making it significantly easier to perform advanced analytics.
As big data becomes increasingly important for pharmaceutical and life sciences companies, Veeva predicts that Nitro will start to generate meaningful revenue within two years.
What are the Risks of Buying Veeva?
Although there’s a lot to like about Veeva stock, investors should also do their research before rushing to buy VEEV. Just because the company is poised for success doesn’t mean that it’s a smart investment to purchase Veeva stock.
For one, Veeva [NYSE: VEEV] is not a great buy for bargain hunters. The stock’s price to earnings ratio currently vacillates between 80 and 100, which is a strong indication that it is overvalued.
Purchasing Veeva stock in the current moment will mean that you are paying a high premium for what’s expected to be several more years of further growth.
In addition, there are concerns that Veeva doesn’t have much room for growth left after successfully dominating the life sciences market with its cloud-based CRM solution.
However, the company is wisely investing in other products such as Vault and Nitro, as well as a new AI-enabled assistant Andi that provides CRM users with tailored insights and suggestions.
Veeva Stock Forecast Summary
Amid concerns about a global economic slowdown, Veeva could be one of the stocks that has the potential to beat the trend. As a provider of virtual (not physical) services, Veeva is relatively immune to concerns about the escalating U.S.-China tariffs and trade war.
The company continues to post robust financial figures, which is a good sign that the stock’s outstanding streak of success since its IPO is likely to continue into the foreseeable future.
However, the bad news for would-be investors is that shares of Veeva [NYSE: VEEV] are likely overvalued, which means that this future growth may already be baked into the share price.
While there’s a lot to like about Veeva, the stock may not be as profitable as other investment opportunities. For now, investors are perhaps best positioned to simply hold their shares of Veeva.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.