On Friday, Evercore ISI adjusted its price target for Veeva Systems (NYSE:VEEV), a cloud-computing company focused on pharmaceutical and life sciences industry applications, to $200 from the previous target of $230. The firm has decided to maintain an In Line rating for the stock.
The revision comes as Veeva Systems faces a need to prove its growth prospects in the near term. Despite positive developments with products such as Vault CRM, Link, Compass, and Vault Basics, the company's reduced guidance has positioned it in a "show me" mode, indicating that investors may remain cautious until there's more certainty in the subscription revenue forecast.
The analyst noted that while the broader market conditions affecting the company are not unique, Veeva Systems will likely experience difficulty in the stock market along with its peers until there is greater confidence in the company's subscription outlook.
After-hours trading showed Veeva's stock at approximately 21 times its expected enterprise value to the calendar year 2025 free cash flow (EV/CY25 FCF), suggesting that the market may have already accounted for skepticism regarding the fiscal year 2025 guidance.
Despite the lowered price target and the challenges highlighted, including the absence of a near-term AI monetization strategy and the lack of a capital return program, such as stock buybacks, which could attract more growth at a reasonable price (GARP) investors, the analyst believes there are no long-term fundamental issues to be overly concerned about.
The new price target of $200 reflects a multiple of around 25 times EV/CY25 FCF, aligning with the general downward adjustment in multiples across the software sector and Veeva's updated guidance.
InvestingPro Insights
As Veeva Systems (NYSE:VEEV) navigates a period where proving its growth prospects is critical, real-time data from InvestingPro offers a nuanced view of the company's financial health and market performance. With a market cap of $31.38 billion and a high P/E ratio of 58.73, Veeva demonstrates significant investor confidence in its future earnings potential. This is further evidenced by a P/E ratio of 62.26 based on the last twelve months as of Q4 2024, which, despite being high, may be justified by the company's strong fundamentals and market position.
InvestingPro Tips highlight that Veeva holds more cash than debt on its balance sheet, indicating a solid financial foundation. Additionally, the company's liquid assets exceed its short-term obligations, providing it with financial flexibility. These insights are crucial for investors who are considering the company's ability to invest in growth opportunities and weather potential market downturns. Furthermore, with a revenue growth of 9.68% over the last twelve months as of Q4 2024, Veeva continues to expand despite market challenges.
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