On Friday, Veeva Systems Inc. (NYSE:VEEV) shares saw its price target adjusted by Piper Sandler, dropping to $235 from the previous target of $245. The firm continues to hold an Overweight rating on the stock, despite recognizing challenges faced by the company.
The adjustment follows a reduction in Veeva's fiscal year 2025 revenue forecast by approximately $28 million and a decrease in its normalized growth outlook to 11% from the previously expected 12%.
The revised outlook by Veeva was attributed mainly to a lower services forecast, influenced by delayed deals and reduced spending in the research and development (R&D) sector.
This comes in the wake of similar downward guidance from other companies such as Workday (NASDAQ:WDAY), Salesforce (NYSE:CRM), and MongoDB (NASDAQ:MDB) earlier in the week.
Piper Sandler's decision reflects concerns over near-term execution risks brought on by a tough macroeconomic environment and uncertainties around R&D budgets.
Veeva reported a steady year-over-year normalized subscription growth of 15% in the first quarter, mirroring the previous quarter's performance.
The company also noted positive developments in its Commercial segment, including multiple successful implementations of its Vault CRM solution.
However, the overall positive aspects were overshadowed by the potential impact of broader economic issues and artificial intelligence (AI) budget unpredictability on the R&D business.
Despite the reduced price target, Piper Sandler expressed a continued positive outlook for Veeva Systems, emphasizing the stock's appeal after a post-market sell-off that saw shares fall below $180.
The firm highlighted that Veeva's enterprise value to free cash flow (EV/FCF) multiple for the calendar year 2025 is now projected at 20 times, which compares favorably to the prior five-year low of 23 times, even after adjusting estimates to account for the challenging macro conditions.
InvestingPro Insights
With Veeva Systems Inc. navigating through a challenging macroeconomic environment, it's insightful to look at the company's financial health and market performance through the lens of InvestingPro data and tips. Veeva's strong cash position is a notable highlight, as the company holds more cash than debt, providing a cushion against economic headwinds (InvestingPro Tip). Additionally, Veeva's liquid assets exceed its short-term obligations, indicating a stable financial footing for near-term operations (InvestingPro Tip).
InvestingPro data reveals a market capitalization of $31.38 billion, reflecting investor confidence in the company's market value. A high P/E ratio of 58.73 suggests that Veeva is trading at a premium, which is reinforced by its adjusted P/E ratio for the last twelve months as of Q4 2024 standing at 62.26. Moreover, the company's revenue growth of 9.68% during the same period underscores its ability to expand despite the tough economic landscape. These metrics, combined with a robust gross profit margin of 71.35%, exemplify Veeva's operational efficiency and its ability to maintain profitability (InvestingPro Data).
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