Veeva Systems (NYSE:VEEV) is a cloud solutions provider to the global life sciences industry. Think pharmaceuticals and biotech. A quick look at Veeva’s financial statements reveals that the company has all the characteristics of a great business. Revenue rose by over 25% a year, and so are profits and free cash flow. Margins are high, and debt is close to zero. The stock price reflects these strong fundamentals and is up 453% since the company’s 2013 IPO.
But the current price of $210 a share is 39% lower than VEEV’s all-time high. In August 2021, Veeva Systems stock reached a record of $344. Two months ago, in May 2022, it dropped as low as $152. Strong sales growth, a fortress balance sheet, and high profits still don’t mean Veeva Systems is immune to market crashes.
That is why we’ll use a different approach to determine if the stock is a good buy at $210 or not. The daily chart below allows us to put all of Veeva Systems’ history as a public company into the Elliott Wave context.
The spectacular uptrend from just over $17 in 2014 to $344 in 2021 can be seen as a five-wave impulse. The pattern is labeled I-II-III-IV-V, where the five sub-waves of wave III are also visible. By the way, so is the impulsive structure of wave 1 of III, marked i-though-v.
Another impulsive sequence, but in the opposite direction, can be recognized in Veeva Systems’ decline from $344 to $152. We’ve labeled it 1-2-3-4-5 in wave A. According to the theory, a three-wave correction follows every impulse. This means the bottom at $152 is unlikely to end VEEV’s corrective phase.
Instead, it makes sense to expect only a temporary recovery in wave B, followed by another decline in wave C. Given the hefty valuation of Veeva Systems, we wouldn’t be surprised if wave C drags the stock towards the $100 mark. Then we might be interested.