Is Veeva A Hedge For The Coronavirus?

Any investors on Wall Street with Veeva Systems (NYSE: VEEV) in their portfolio will be counting their lucky stars this week. Shares of the cloud computing software company remain relatively intact in the face of the coronavirus driven correction which has the S&P 500 fall by as much as 16% in recent weeks.

The company released their Q4 earnings after Tuesday’s session and comfortably beat analyst expectations. Over the previous two years, they’d beaten the EPS and revenue consensus 100% of the time so had good momentum coming into the release but few would have expected the 34% growth in revenue year on the year. For a $20 billion-dollar company, that’s not a bad print with the majority of the jump coming from Veeva’s subscription business. They increased their customer base by 20% which helped drive their subscription revenue retention to a very healthy 121%.

CEO Peter Gassner remarked, “the past year was an exceptional one for Veeva. We focused on customer success and accelerated our pace of innovation in established and new markets. We have set ourselves up well from a product, operating model, and team perspective to execute on the major opportunities ahead.”

Confident Management

Management were obviously feeling hot and they raised forward guidance which helped shares to open up on Wednesday with a 5% gap. Shortly afterward Morgan Stanley was out with a raised price target based on Veeva’s "clean beat across all metric," billings that came in "well ahead of expectations," and a Subscription Vault forecast that suggests there’s "plenty of room" for growth.

Canaccord Genuity liked the forward guidance raise and remarked how Vevva has "historically been quite prudent when it comes to setting financial targets," which makes the raised revenue outlook "a signal of confidence." And only last month, the Piper Sandler team were out with an Overweight rating and a price target that puts a 30% premium on where shares are trading today. They also called Veeva a "best-in-class cloud software asset" thanks to its impressive growth and strong margin model.

Leading From the Front

It’s hard to argue with them. Through July of last year, Veeva had been on a remarkable run since early 2016. They’d notched a 750% rally and while they’d cooled a little in the second half of 2019, there has been some solid support at the $140 level where buyers have constantly stepped in. There have been several attempts to reclaim the all time highs seen last summer and with the internal momentum that Veeva has, the odds are with them doing it as soon as coronavirus fears abate and we see a risk-on sentiment return.

Compared to other big CRM names likes Salesforce (NYSE: CRM), Veeva is leaps and bounds ahead. Over the past two years, their shares are up 86% compared to Salesforce’s 38%. If we stretch that back to the last five years, the difference is magnified with Veeva shares up 480% compared to the Salesforce shares 171% rally.

Investors looking to get back long the market could do worse than adding a tech name like Veeva to their portfolio. They have a well oiled growth engine that’s running well, are in favor with analysts and have shares that are showing remarkable strength while the likes of Apple (NASDAQ: AAPL) have fallen by as much as 20% in the past fortnight. Shares are trading right around the big support level and look like they want to go higher. The risk/reward is decent here as investors can set an easy stop to get them out if the stock starts breaking down.