Veeva Earnings: Momentum Upheld as Investors Gain Confidence in Resilient Growth and Margin Recovery

Wide-moat Veeva reported strong third-quarter earnings that came in above our estimates. Total sales of $699 million were up 13.4% year over year and came in about 2% higher than our projected $684 million. While the macroeconomic environment looks unchanged, new customer wins, innovation, and strong execution made for a positive readout. Margins also expanded nicely, with adjusted EBIT margin coming in at 43.5%, up 200 basis points sequentially and over 500 basis points compared with last year. Against the backdrop of solid performance, management raised sales and EPS guidance around the low single digits, primarily driven by subscriptions, with mild contributions from services. The market seems to appreciate yet another quarter of strong numbers from Veeva, with shares up about 7% after hours. Investors lost appetite in Veeva after the firm made two guidance cuts in 2023, but we think they are starting to regain confidence in Veeva’s ability to deliver growth, with more reassurance coming from November investor day updates. After slightly raising our near-term assumptions, we've inched up our fair value estimate to $275 per share from $273. Even after the jump in shares following results, we still think there is a fair amount of upside to the name and maintain a favorable long-term outlook on the firm.