Veeva Systems (Nasdaq: VEEV) was lower by as much as 7% before finishing down 4% following the company's Q3 results which showed it beating analysts' estimates on the top and bottom-line but delivering disappointing guidance for the next quarter.
VEEV builds enterprise software for the healthcare, medical, and pharmaceuticals industries. This puts it at the intersection of two growing markets - spending on IT/cloud computing/enterprise software and healthcare spending. Both are expanding at a faster rate than the economy.
Since its IPO in 2013, the stock is up more than 600%. It's also up 126% from its March 2020 bottom but the stock has underperformed and is down 22% from its highs in early August. Most of these losses have come since early November as the stock has underperformed along with other growth stocks due to rising short-term rates.
Inside the Numbers
In Q3, Veeva Systems reported $0.97 cents per share which topped expectations of $0.87 per share. It was also a 24% improvement from last year. Revenue came in at $476.1 million which topped consensus expectations of $466 million and 26% better than last year. Subscription revenue accounted for $380 million in revenue which was also 26% higher than last year.
For the full year, Veeva expects revenue between $2.15 billion and $2.17 billion which was below analysts' expectations of $2.185 billion. Guidance for next quarter also came in worse than expected. For Q4, it anticipates revenue between $478 million and $480 million, while analysts were looking for $480 million. Earnings per share came in-line with expectations at $0.88 per share.
Overall, Veeva's stock remains attractive on a longer-term basis despite its near-term challenges because it's the leading company in a growing and crucial sector. Veeva's software systems are the backbone of the healthcare and pharmaceutical industries and have become integral to these companies' operations.
This means there is a wide moat as their customers are unlikely to switch given the cost and expense. Further, Veeva benefits from the positive economics of a software subscription business in terms of growth and margin expansion. Therefore, investors should consider adding the stock on weakness.