Morgan Stanley upgraded Veeva Systems (NYSE:VEEV) from Underweight to Equalweight on Tuesday, while simultaneously lowering its 12-month price target to $205.00 from $222.00. The stock is trading at $174.11, only marginally above its 52-week low of $168.13, after a decline of nearly 38% in the past six months.
Analyst Craig Hettenbach said the firm’s view has changed materially since a downgrade in June 2023 that flagged risks to Veeva’s core CRM business stemming from competition with Salesforce. Hettenbach noted that investor sentiment has shifted since that earlier call.
According to InvestingPro data cited by the analyst, Veeva appears to trade below its Fair Value, despite a price-to-earnings ratio of 34. Hettenbach added that some of the residual risks tied to potential share loss in CRM - including pricing pressure - now look better incorporated into the equity, which he observed is trading at a 10-year low on an enterprise value to free cash flow basis.
The analyst referenced recent win rate data in CRM as the most up-to-date competitive snapshot informing his view. Hettenbach also highlighted company-level financial flexibility: Veeva’s board authorized its first-ever buyback in January, the firm holds $6.6 billion in cash, carries no debt and generates roughly $1.4 billion in annual free cash flow. The buyback authorization totals $2 billion, according to the analyst.
Separately, the company publicly announced a $2 billion share repurchase program for its Class A common stock, to be executed over the next two years. The program permits repurchases via open market transactions, privately negotiated deals or other methods as the company sees fit.
Market analysts remain divided on the company’s outlook. Goldman Sachs has downgraded Veeva to a Sell rating, citing concerns about the company’s ability to sustain growth as certain flagship products mature. By contrast, Truist Securities upgraded Veeva to a Buy rating, pointing to the current valuation as an attractive entry point and observing that earlier worries over customer retention have largely been addressed.
The combination of a newly authorized buyback, strong cash position and differing analyst assessments underscores a range of views about Veeva’s near-term trajectory and longer-term growth prospects. Investors are therefore weighing competitive dynamics in CRM and valuation signals against the company’s balance sheet strength and cash generation.
Key points
- Morgan Stanley raised Veeva to Equalweight and cut the price target to $205 from $222.
- Veeva announced a $2 billion repurchase program; the company holds $6.6 billion in cash, no debt and about $1.4 billion in annual free cash flow.
- Analyst views diverge - Goldman Sachs has a Sell rating while Truist Securities moved to Buy, reflecting mixed perspectives on growth sustainability and valuation.
Risks and uncertainties
- Competitive pressure in the CRM market, particularly from Salesforce, poses a risk to Veeva’s core revenue streams and pricing power.
- Challenges in maintaining growth as key products mature could affect revenue momentum and investor sentiment.
- Valuation and cash-flow metrics are under scrutiny; while some metrics point to undervaluation, the company’s share price has been weak, reflecting market concern over near-term fundamentals.
This article presents the available information on analyst actions, the buyback program and stated financial metrics. Where details were limited in source statements, the presentation reflects only the information provided by the analysts and company disclosures.