To The Moon

In today's edition, we will track the fundamental readings of long-term bullish companies in strong (TigerTrade Top 1 Gainer) concepts each week and look forward to your attention and discussion.

Disclaimer: Capital at risk. This is not direct financial advice or a recommendation to acquire or dispose of any investment, but for communication only.

It was an optimistic week for stocks following the debt ceiling deal and strong labor market data.

The best-performing industries are healthcare technology, consumer finance, automobile manufactures, copper and internet services.

Considering the different perceptions of the stock, this time TigerPicks choose  $Veeva(VEEV)$ to have a fundamental highlight to help users understand it better.

$Veeva(VEEV)$

VEEV, the leading SaaS company, recently reported its Q1 financial results, showcasing impressive revenue growth and a positive outlook for the future. The company's performance exceeded expectations, driven by solid subscription revenue and notable customer wins. With a focus on innovation and expanding its product offerings, VEEV is well-positioned to capitalize on the AI wave and continue its upward trajectory.

Q1 Results

For the quarter ended April, VEEV saw revenue increase 4% to $526.3 million. Subscription revenue moved 3% higher to $414.5 million. Service revenue rose 9% to $111.8 million. Analysts were looking for revenue of $517.3 million.

The company saw a $51 million revenue impact from the standardization of termination for convenience rights. This accounting change impacts multi-year ramping contracts. Excluding the TFC impact and currency, revenue rose 16% and subscription revenue jumped 17%.

Commercial Solutions subscription revenue rose 5% to $239.4 million, while service revenue for the segment rose 4% to $44.9 million. Management said it added 11 new SMB customers in the quarter for its core CRM product.

The company noted that it is adding an AI application called CRM Bot for its Vault CRM product. The product will be a separate license, but it does not have pricing for it yet, as it focuses on getting the product right.

R&D Solutions revenue edged up to $175.2 million, essentially flat versus a year ago. Service revenue for the segment jumped 13% to $66.9 million.

The company said it added its second enterprise agreement for its Vault Safety product in the quarter. It also added 26 new customers for its Vault Quality solution.

Adjusted EPS came in at 91 cents, easily surpassing the analyst consensus of 80 cents.

Normalized billings were up 11% year over year to $554 million. This came in ahead of company guidance due to more new business having annual terms than expected.

The company generated $444 million in adjusted operating cash flow, which excludes a tax benefit of $62 million. It ended the quarter with more than $3.6 billion in cash and short-term investments and zero debt.

Overall, when you strip out the TFC adjustment, VEEV reported a solid quarter. R&D Solutions, while seeing its GAAP revenue flat, continues to be the growth driver, as evidenced by its strong service revenue growth and customer wins. CRM Solutions, while more mature, also continues to grow. The resiliency of VEEV’s customers was evident in the quarterly results.

Adjusted EPS nicely beat the consensus, which in part is likely due to higher interest rates. VEEV carries a lot of cash and short-term investments, which is helping bolster its bottom line and add some additional cash flow as well.

Q2 Outlook

Looking ahead, VEEV forecast fiscal Q2 revenue to come in between $580-582 million. That includes a $17 million TFC standardization impact headwind and a $5 million currency headwind. The analyst consensus was for Q2 revenue of $580.1 million.

Adjusted operating income is projected to be between $199-201 million, while adjusted EPS is projected to be between $1.12-1.13. The analyst consensus was for Q2 EPS of $1.06.

It is looking for normalized billions to be about $529 million for the quarter.

VEEV 2023 Guidance

For the full year, VEEV is guiding for revenue of between $2.36-2.37 billion, an increase of $10 million from its previous guidance. The forecast includes a $95 million impact from TFC standardization and $15 million in currency headwinds.

Subscription revenue is projected to be between about $1.89 billion, up $10 million from its prior forecast. Commercial Solution revenue is expected to come in around $980 million, while R&D Solutions revenue is forecast to be approximately $910 million.

VEEV is projecting adjusted operating income to be $810 million, with adjusted EPS of around $4.59. The company previously guided for full-year EPS of $4.22 and the consensus was for EPS of $4.32.

It is looking for normalized billings to be about $2.615 billion for the year, up 15%. Over 40% of its billings are expected to occur in Q4.

The company expects adjusted operating cash flow of $840 million. That’s a $30 million increase from its earlier guidance. The higher forecast is partially helped by an expected increase in interest income.

VEEV also reiterated its fiscal 2025 guidance calling for revenue of at least $2.8 billion and at least $1.0 billion in adjusted operating income.

Competitive Advantage

Veeva has a competitive advantage in several ways. Their customers have high switching costs, and Veeva also has a lot of industry data that could be really helpful in the future as they move to their own CRM Vault and could use AI to benefit from that. Furthermore, there are some barriers to entry when it comes to working with such sensitive data.

And I think they will improve their competitive advantage by having Vault because they don't have to rely on Salesforce (CRM) anymore, but that could also be a risk because Salesforce then has the opportunity to compete in the market, and they are certainly a strong competitor as other companies have learned.

Business Improvements

Gross Margins

Over the last 10 years there has been a significant improvement in gross margins and Vault could help to improve this further as I could probably see a 2%-5% improvement over a longer period of time by having their own CRM.

Valuation

VEEV currently trades at under 10x fiscal year 2024 (ending in January) revenue of $2.37 billion. (EV/S), while its EBITDA multiple is 28x based on the consensus of $824.3 million.

For fiscal-year 2025, it trades at 8.2x revenue estimates of $2.82 billion and 22x the adjusted EBITDA consensus of $1.05 billion.

VEEV has historically traded at a high P/S ratio, with a P/S ratio of over 19x for four of the past five years. You'd have to go back to 2016 to see a ratio under 10x.

VEEV Historical Valuation

Stock Price Forecast:

Here are the target price forecast for the future 12 months from analysts on CNNMoney.com.

The 25 analysts offering 12-month price forecasts for Veeva Systems Inc have a median target of 210.00, with a high estimate of 240.00 and a low estimate of 170.00. The median estimate represents a +7.69% increase from the last price of 195.00.

Hope this analysis helps you get more understanding of the company's whole image, Tiger Picks will follow up the monthly performance as a longterm track.

Resource:

https://seekingalpha.com/article/4608963-veeva-systems-veev-strengths-shine-through-with-q1-results

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