Deutsche Bank Downgrades Veeva Systems (VEEV) to Hold

Deutsche Bank downgraded Veeva Systems (NYSE: VEEV) from Buy to Hold with a price target of $30.00 (from $37.00). The change follows Q4 results and guidance. Analyst Karl Keirstead noted CRM growth concerns.

"Veeva delivered mixed results, highlighted by billings of $115m (+50% and above our $110m estimate), total revs of $87m (+39% y/y and in-line), solid subscription revs growth of 46% (above our 41% estimate), extraordinary non-GAAP OM of 29% (above our 27% estimate) and an OCF miss (negative $1m, the first negative OCF quarter since the IPO). The guidance for billings growth and total revs growth was disappointing and in our view will weigh on the stock for at least a few quarters," said Keirstead.

"Veeva guided to 1QF16 billings of $80-$85m, up just 8%-15% y/y and well below our $102m estimate, saying that renewals are skewing more to the fourth quarter. Coupled with the guide for just 20% growth in CRM subscriptions revs growth in FY16 (down from ~45% growth in FY15 and implying growth of <20% for the “core” CRM/SFA business excluding CRM add-ons), we now also wonder if Veeva is seeing a material slowdown in new CRM billings growth as this business (80% of the mix) now has a market share of 50%. We're lowering our FY16 billings growth estimate from 35% to 25%," continued the analyst.

"Veeva shares trade at 49x EV/FY16 FCF and 33x EV/FY17 FCF. Given the potential for a steep deceleration in revs and billings growth in FY16, we conclude that these multiples won't hold," he added.

For an analyst ratings summary and ratings history on Veeva Systems click here. For more ratings news on Veeva Systems click here.

Shares of Veeva Systems closed at $32.69 yesterday.

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