The past six months have been rough for Veeva Systems (VEEV 0.75%). The stock has declined 35% over this period as the market fears that mounting competition will lead to disappointing financial results and a dwindling market share.
That said, there are still good reasons to consider investing in Veeva Systems. Let's consider one that makes the stock worth holding on to for a very long time.
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The leader in its niche
Veeva Systems provides cloud-based services. The company's size and scale pale in comparison to the biggest leaders in this large market, a list that includes tech giants such as Microsoft and Alphabet. However, Veeva has achieved considerable success by focusing almost exclusively on life sciences companies. Veeva Systems didn't pick a random industry out of a hat -- pharmaceutical, biotech, and medical device companies face challenges that require services tailored to their industry.
For instance, developing and marketing life sciences products is a lengthy, expensive, and uncertain process that requires navigating regulatory hurdles while running clinical trials, maintaining data integrity, and protecting patient privacy. Veeva Systems provides cloud-based products to its clients with those constraints in mind, which has made it one of the leaders in its niche of the cloud market. Veeva Systems has attracted some of the largest life sciences companies in the world, including Eli Lilly, Merck, and Novo Nordisk.
NYSE: VEEV
Key Data Points
Veeva has built a competitive advantage through switching costs, as its customers rely on its services for critical day-to-day operations. Switching to a competitor is possible, but they won't do it casually. Veeva Systems' moat and its position in its industry niche are good reasons it could perform well over the long run.
A good time to buy the stock
Here's something else worth keeping in mind: The life sciences industry will continue to expand, granting Veeva Systems an increasingly larger addressable market. The company set a goal to reach a $6 billion annual revenue run rate by 2030, almost double its trailing 12-month revenue of $3.1 billion. It needs a compound annual growth rate of nearly 18% to achieve that goal in the next four years.
Veeva Systems has historically met its revenue goal on schedule, and in my view, it can do the same with this one. Competition might be intensifying, but Veeva Systems is also adapting, notably by launching new services, including AI-powered ones.
That's why, after significantly lagging the market over the past six months, Veeva Systems looks like a solid buy on the dip. The company could perform well in the next four years and beyond as it maintains its status as one of the go-to providers of cloud-based services to the large life sciences industry.
