Veeva Earnings: Service Challenges and Guidance Cut Spook Investors, but We Remain Bullish

Wide-moat Veeva Systems reported strong first-quarter earnings and marked a solid start to its fiscal year. Total sales of $650 million were up 23.6% year over year and came in above management’s previous guidance of $640 million-$643 million. That said, we saw another cut in full-year sales guidance. About two thirds of the change was attributed to worse-than-expected services demand with the remainder coming from stronger foreign-exchange headwinds. Albeit a small magnitude in the change— a decrease of $30 million to $2.70 billion-$2.71 billion from $2.725-$2.740 billion—this revision follows a cut in guidance from last November and we think the market showed a lot of pessimism. The stock was down about 10% afterhours and we think this somewhat demonstrates investors' lack of confidence in Veeva. However, we think this is an overreaction to solid quarterly results and the change in guidance doesn’t warrant the selloff. We aren't making any material changes to our model and maintain our fair value estimate of $270 per share.