Veeva Systems Inc (NYSE:VEEV) just released its Q1 earnings and VEEV stock had its best day in five years. And Wall Street is starting to realize that this stock is the one to beat in this fast-growing niche.
Fortunately for my readers, I’ve been bullish on VEEV stock for a while now and even after its big earnings call, it’s still an A-rated stock in my Portfolio Grader.
Veeva is focused on cloud-based solutions in the life sciences industry.
That may sound like a fairly general market focus but if you consider the complexities of the life sciences world, you would understand that between the federal and state regulations, the scientific protocols, the privacy restrictions in customer resource management development, this is a highly complex sector. And that means significant barriers to entry.
It also means that if you’re good, you’re going to get a lion’s share of the business, especially with big clients, like drug companies. As with most enterprise level companies, they generally gravitate to the same specialized programs and platforms since it allows employees that have spent time in other firms in the industry to get up to speed quickly rather than lose productivity in lengthy onboarding training.
One example of how VEEV is commanding this space was discussed by a company analyst recently. He observed that there was concern among analysts that life sciences CRM competitor Iqvia was making inroads with a less expensive product. That would mean VEEV could lose market share and if it competed on price, it would lose its healthy margins. It would also open the door to potential new competitors.
But after inking a deal with big pharma Merck (NYSE:MRK), MRK has now re-signed with VEEV. That is a very bullish sign for VEEV.
And it’s a statement that reverberates around the industry.
Bottom Line on VEEV Stock
VEEV stock is up a whopping 73% year-to-date and over 100% in the past 12 months. That means it’s actually showing value for its P/E of 94X.
When you look at its Q1 numbers you can see why everyone is piling in.
Earnings beat estimates handily and were up 61% on a year-over-year basis. Revenue also blew past estimates and were up 25% from the same quarter last year. Subscription service revenues were up 27%. Operating income, margins and gross profit also were up significantly.
All this and the U.S. was entering a trade war with the second-largest economy in the world.
The fact is, life sciences is one sector that will likely be one of the last to see any damage from the trade wars.
In the West, productivity enhancing services are crucial to staying competitive. In China, their life sciences firms aren’t ready to take on the challenges of the massive population. They need outside firms to help them.
Granted there is some risk that the U.S. government could cut off tech firms in this sector from working in China, but again, that risk is slim and this is still such a young sector that there is plenty of growth to be had outside China.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.