Veeva Systems (VEEV) Stock Trades Down, Here Is Why

Jabin Bastian /
2023/11/09 11:39 am EST

What Happened:

Shares of healthcare software provider Veeva Systems (NASDAQ:VEEV) fell 7.3% in the morning session after the company revised its financial projections downward. Management cited a challenging macro environment, lower-than-expected services revenue, and the Inflation Reduction Act as reasons for the revised guidance. As a result, the company lowered its fiscal year 2024 revenue guidance by about $15 million. It now expected Q3’24 revenue at $616M from $614M–$616M. Full-year fiscal year 2024 guidance for subscription revenue and non-GAAP operating income are expected to be in line to slightly above the prior guidance. For fiscal year 2025, Veeva is shaving off $50m from its top-line revenue projection and expects at least 2.75B in revenue, down from at least $2.8B. On a more positive note, Veeva said it remains on track to meet its long-term goal of $3 billion revenue run-rate, about one year ahead of the target. Overall, the revised outlook is not a good sign and could make it tough for investors to stay positive.

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What is the market telling us:

Veeva Systems's shares are quite volatile and over the last year have had 5 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 5 months ago, when the stock gained 8.4% on the news that the company reported a "beat and raise quarter." First quarter results exceeded analysts' expectations across key metrics, including revenue, subscription revenue, free cash flow, and earnings per share (EPS). However, gross margin deteriorated. Moving ahead, revenue and operating income guidance for the next quarter were roughly in line with Consensus. Additionally, the FY'2024 revenue guidance was raised and in line with expectations. Management expressed optimism regarding the company's outlook, adding that "We see momentum in multiple product categories, which positions us well to deliver durable and profitable growth through 2025 and beyond." Overall, it was a decent quarter for the company, with strong financial results and positive guidance, especially considering some of the mediocre quarters and cautious commentary from other software companies that reported the same day.

Veeva Systems is up 9.4% since the beginning of the year, but at $174.71 per share it is still trading 22.3% below its 52-week high of $224.90 from September 2023. Investors who bought $1,000 worth of Veeva Systems's shares 5 years ago would now be looking at an investment worth $1,865.

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