On Friday, Barclays made adjustments to its financial outlook on Veeva Systems (NYSE:VEEV) shares, a cloud-computing company focused on pharmaceutical and life sciences industry applications.
The firm's analyst reduced the price target to $220 from the previous $245 while maintaining an Overweight rating on the company's shares.
The decision to lower the price target follows Veeva Systems' first-quarter results and updated guidance. The company's recent change in Chief Financial Officer (CFO) had prompted speculation about a potential revision in billing guidance, which materialized with the latest report.
The adjustment is largely attributed to the timing of research and development (R&D) deals, which are expected to contribute more significantly to the fourth quarter, rather than being evenly distributed throughout the year.
Additionally, some of the revised expectations are due to the ramp-up of Electronic Data Capture (EDC) deals, which are believed to provide Veeva Systems with some level of visibility.
Furthermore, the guidance for subscription revenue was also revised downwards. This is due to later closures of R&D deals, which impacts the company's ability to recognize revenue on a ratable basis.
However, it was noted that the commercial outlook for the company is improving, which helps to mitigate the overall impact on subscription revenues.
Barclays underscored that the shift in deal timings is not perceived as a result of competitive pressures, as Veeva Systems is seen to be gaining market share in the R&D domain.
Therefore, these are not expected to alter the long-term value of the company. The new price target of $220 is based on a 28 times multiple of the company's free cash flow (FCF).
InvestingPro Insights
In light of Barclays' recent adjustments to the financial outlook of Veeva Systems, a deeper dive into the company's financial metrics can provide additional context for investors. According to InvestingPro data, Veeva Systems holds a market capitalization of $31.38 billion, and its P/E ratio stands at 58.73, indicating a high valuation in terms of earnings. The company's Price / Book ratio as of the last twelve months leading up to Q4 2024 is 6.76, which suggests a premium compared to the book value of its assets.
InvestingPro Tips highlight that Veeva Systems is trading at a high earnings multiple and has a high P/E ratio relative to near-term earnings growth, which could be a concern for value-focused investors. However, on the positive side, Veeva Systems holds more cash than debt on its balance sheet and has liquid assets that exceed its short-term obligations, providing financial stability. Additionally, analysts predict the company will be profitable this year, and it has been profitable over the last twelve months. It's also noteworthy that the stock generally trades with low price volatility, which may appeal to risk-averse investors.
For those looking to delve further into Veeva Systems' financials and performance, there are additional InvestingPro Tips available at https://www.investing.com/pro/VEEV. Readers can also take advantage of a special offer using coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more insights and analytics to inform investment decisions.
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