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Veeva Systems’, an American cloud-computing company focused on pharmaceutical and life sciences industry applications, price target was raised to $323 from $253 with Overweight stock rating, according to Morgan Stanley equity analyst Stan Zlotsky, who also said with consistent growth, profitability, and defensibility, Veeva is a unique software asset.

Late last month, Veeva reported total revenue of $353.7 million in the second quarter, up from $266.9 million one year ago, an increase of 33% year-over-year. Subscription services revenue for the second quarter were $283.5 million, up from $217.3 million one year ago, an increase of 30% year-over-year.

Veeva forecasts fiscal year ending January 31, 2021 total revenues between $1,415 and $1,420 million and fiscal third-quarter Total revenues between $360 and $362 million.

“In our new model, we raise our FY21 revenue estimates to $1,419 million (vs $1,387 million prior), within management’s updated guidance range of $1,415-1,420 million. Our FY21 revenue estimates imply YoY subscription/total revenue growth of +28.9%/+28.5% compared to +26.6%/+25.6% previously and includes ~$92.5 million of inorganic revenue from Crossix and Physician’s World (unchanged). We raise our FY21 operating margin estimates to 38.3%, versus 36.5% previously and similarly lift our FY22/FY23 margin estimates to 39.5%/40.8% from 37.6%/39.0% previously,” said Stan Zlotsky, equity analyst at Morgan Stanley.

“Our FY21/FY22 OCF estimates also increase to $544.1 million /$682.1 million from $505.8 million /$642.3 million previously. On the back of our raised estimates and improving confidence in Veeva’s FCF durability, we increase our price target to $323 from $253 previously. To arrive at our new price target, we apply a 53x multiple (vs 43x prior) or 2.5x EV/FCF/G (vs 2.2x prior) to our CY25 FCF estimate of $1,504 million ($1,357 million previously) and discount back at a 7.6% WACC (unchanged),” Zlotsky added.

Morgan Stanley target price under a bull-case scenario is $435 and $214 under the worst-case scenario. Veeva Systems had its price objective raised by equities research analysts at Truist to $320 from $222.

Several other equity analysts have also updated their stock outlook. Piper Sandler lifted their price target on Veeva Systems to $310 from $220 and gave the company an “overweight” rating. Stephens boosted their target price on Veeva Systems to $325 from $290 and gave the stock an “overweight” rating.

Twenty analysts forecast the average price in 12 months at $293.79 with a high forecast of $325.00 and a low forecast of $228.00. The average price target represents a 7.20% increase from the last price of $274.07. From those 20, 15 analysts rated ‘Buy’, five analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

“Veeva’s core products provide SaaS solutions for the Life Sciences industry, targeting $10 billion+ of spend today with potential overtime to address more of the $44 billion Life Sciences spend on IT, leveraging the company’s strong brand recognition and expanding its TAM into other regulated industries and use cases. As Veeva penetrates this large TAM, we see a sustainable 18% revenue CAGR over the next 5 years,” Morgan Stanley’s Zlotsky added.

Upside risks: 1) Veeva penetrates its TAM faster than expected as it gains traction outside life sciences. 2) Traction within newer products and add-ons accelerates -highlighted by Morgan Stanley.

Downside risks: 1) 70%+ seat penetration in CRM could limit growth while declining sales headcount in Life Sciences may be a headwind. 2) TAM may be more limited due to vertical-specific focus. 3) Increased competition on CRM by competitors such as Iqvia.

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