Shares of Veeva Systems Inc (NYSE: VEEV) spiked higher after the provider of cloud solutions reported a strong fiscal first-quarter earnings report Wednesday afternoon. As shares hit a new 52-week high, the Street debates if it's too late for investors to be buyers of the stock.
Bank of America's Brad Sills maintains a Buy rating on Veeva with a price target lifted from $140 to $160.
Morgan Stanley's Stan Zlotsky maintains at Equal-Weight, price target lifted from $144 to $152.
KeyBanc Capital Markets' Brent Bracelin maintains at Overweight, price target lifted from $133 to $172.
Shares of Veeva Systems traded higher by 15 percent Thursday and hit a new 52-week high of $156.85.
BofA: Broad Strength
Veeva's "strong" earnings was driven by broad strength that resulted in 25 percent year-over-year revenue growth, Sills wrote in a note. The company secured its first enterprise CDMS deal with a major pharmaceutical company on top of signing 47 new Vault customers, which mark a new quarterly record.
The company signed a large CPG and cosmetics company to its platform, which Sills said suggests management's focus on new verticals is resulting in organic growth with minimal impact to margins. Management lifted its margin outlook by 100 basis points.
Morgan Stanley: What To Like And Monitor
Veeva reported another strong quarter highlighted by multiple positive read-outs, Zlotsky wrote in a note. These include:
- Billings growth of 16 percent and an increase in billings guidance for 2020;
- Operating margins of 38.2 percent is a record high and among the best within the entire software group;
- Commercial cloud subscription revenue likely accelerated from 11.7 percent last quarter to 12.8 percent; and
- Vault accounted for around 47 percent of subscription revenue and should top the 50 percent milestone in the back half of the year.
On the other hand, factors investors may want to watch include ASC606 rules around revenue recognition could be a tailwind to some contracts and two large litigations and similar ASC606 rules that could impact margins moving forward.
KeyBanc: Premium Valuation Justified
KeyBanc revised its price target to $172. Bracelin said the valuation is justified after the company showed an acceleration in subscription revenue growth to 27 percent, which is the highest seen in more than a year and driven by higher adoption of the Vault portfolio of industry cloud applications.
He said the stock's premium valuation is also justified amid expectations for margins to sustain above 30 percent and free cash flow margin rises to close in on 42 percent in 2023.
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