Morgan Stanley revised its stance on Veeva Systems, raising the rating to Equal-weight after a marked decline in the company’s share price. The bank said that, following the steep drop, competitive threats to Veeva’s core customer relationship management (CRM) franchise are becoming clearer and that investor sentiment may now be overly negative.
The stock has tumbled about 45% from its high in October, pressured in part by the loss of four of the top 10 pharmaceutical clients in its CRM business and growing apprehension that advances in artificial intelligence could disrupt established software providers.
Although Morgan Stanley acknowledged ongoing risks from customer defections and potential pricing pressure, the firm said much of that risk appears to be reflected in the current valuation. Veeva’s enterprise value relative to free cash flow has fallen to its lowest level in 10 years, prompting the bank to lower its price target to $205 from $222 to account for reduced sector valuation multiples.
The analyst note described a shift in the market debate: earlier views that Salesforce would be unable to gain share in life sciences have given way to concerns that Veeva itself may struggle to hit its 2030 objectives. Despite those worries, Morgan Stanley flagged several potential supports for the company, including a $2 billion share repurchase authorized in January and a robust balance sheet.
Veeva holds approximately $6.6 billion in cash, carries no debt, and generates roughly $1.4 billion in annual free cash flow. Those metrics underpin the bank’s expectation of a slight earnings beat in the upcoming fourth-quarter report, and fiscal 2027 guidance that is broadly in line with consensus—although the firm’s own forecasts for fiscal 2027 and 2028 remain marginally below consensus estimates.
Artificial intelligence looms as a pivotal variable for sentiment. Morgan Stanley noted that while Veeva possesses domain expertise in life sciences and has shown early AI traction, the emergence of large language model tools for clinical trial processes raises questions about the durability of its competitive moat. The bank highlighted concerns especially around legacy offerings such as electronic trial master file software.
Those AI-related worries have already affected other mature software names, according to the note, with examples cited including ServiceNow, Adobe and Atlassian. Morgan Stanley concluded that clearer proof Veeva can convert AI capabilities into new products and revenue growth will be required to shift market sentiment more positively.
Contextual takeaways
- Valuation has compressed to a 10-year low on an enterprise value to free cash flow basis, reflecting heightened investor caution.
- Balance-sheet strength and a sizable buyback provide tactical support, even as long-term execution and AI-related risks persist.
- Near-term results may modestly beat expectations, with fiscal 2027 guidance seen as largely in line with market views.