On Thursday, Piper Sandler showed confidence in Veeva Systems (NYSE:NYSE:VEEV) by increasing the price target for the company's shares to $230, up from the previous target of $225, while reiterating an Overweight rating. The adjustment follows a positive evaluation of the company's performance in the second quarter, particularly noting the momentum of deals with top 20 clients.
The firm highlighted several significant wins in the quarter across various product lines, including Regulatory, Clinical, Quality, Safety, and Link Key People.
These successes have alleviated concerns about potential delays in large deals. The analyst pointed out that Veeva Systems' revised subscription growth outlook, which is $12 million above the previous guidance, and improved operating margins, now over 40%, indicate robust demand and strong execution.
Piper Sandler's decision to raise the price target is based on higher free cash flow (FCF) margins and an increased multiple of 25 times the calendar year 2028 estimated enterprise value to free cash flow (EV/FCF), up from the prior multiple of 24. The firm suggests that further stabilization in demand, cross-sell momentum, and margin improvements could lead to additional expansion of the multiple.
The report also mentioned that Veeva Systems' solid performance, coupled with a favorable risk-reward profile at 23 times the calendar year 2026 estimated EV/FCF, might attract the attention of large-cap growth investors. This interest could be particularly significant given that the company's shares have been range-bound for more than two years.
In other recent news, Veeva Systems has posted robust fiscal second-quarter results, with reported total revenue of $676.2 million, marking a 15% year-over-year increase. The company's earnings per share (EPS) of $1.62 exceeded expectations, and billings of $611 million also saw an 11% increase. Baird and Evercore ISI have both increased their price targets for Veeva Systems, to $251 and $220 respectively, following these strong results.
Veeva Systems also launched new products, including Veeva Site Connect and Service Center, and anticipates the release of the next Vault CRM in the fourth quarter.
According to Baird, Veeva's commercial segment showed strong performance, contributing significantly to the overall growth. The research and development (R&D) sector also exceeded estimates, providing a positive update on the progression of larger deals.
Looking forward, Veeva Systems anticipates about 5% year-over-year growth in Q3 billings, with a stronger quarter expected in Q4. The company's annual guidance remained mostly unchanged at $2.707 billion at the midpoint, with a slight increase in operating income and EPS forecasts.
InvestingPro Insights
Piper Sandler's revised price target for Veeva Systems (NYSE:VEEV) reflects optimism about the company's financial performance and growth prospects. Supporting this upbeat assessment, InvestingPro data shows a robust revenue growth of 14.31% over the last twelve months as of Q1 2023, with an even more impressive quarterly revenue growth rate of 23.56%. The company's gross profit margin stands at a healthy 72.48%, showcasing its ability to maintain profitability.
From an investment standpoint, two InvestingPro Tips highlight the company's financial health: Veeva Systems holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations, signaling strong liquidity and financial resilience.
For those considering Veeva Systems as a potential investment, it's worth noting that the company is trading at high valuation multiples, including a P/E ratio of 57.97 and a Price/Book ratio of 6.59. While these metrics suggest a premium valuation, they are also indicative of investor confidence in Veeva's future earnings potential. It's also important to note that analysts predict the company will be profitable this year, and it has been profitable over the last twelve months.
For a more comprehensive analysis and additional insights, investors can explore the 11 total InvestingPro Tips available for Veeva Systems at https://www.investing.com/pro/VEEV, which could provide further context to Piper Sandler's positive outlook and the company's financial metrics.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.