Josh Brown's 'Best Stocks in the Market': Veeva Systems

This video features Josh Brown, CEO of Ritholtz Wealth Management, spotlighting Veeva Systems (VEEV) as one of his "best stocks in the market" on CNBC's "Halftime Report." The primary purpose of the segment is to explain why Veeva Systems, a company he believes is often overlooked by the broader market, represents a compelling investment opportunity. Brown provides a detailed analysis, blending fundamental business strengths with technical stock performance indicators, to make his case for Veeva's significant value and growth potential within the pharmaceutical and biotech sectors.

Brown emphasizes Veeva's critical role as the "industry standard CRM platform for drug discovery," highlighting its deep integration within the healthcare ecosystem. A key point of his analysis is Veeva's strategic shift from building its system on top of Salesforce to developing its own proprietary platform, "Vault CRM." This significant capital expenditure and strategic move have allowed Veeva to enhance its offerings, increase operating margins, and sign major deals with leading pharmaceutical companies like Bristol-Myers. The speaker also draws a direct connection between Veeva's technology and the excitement among pharmaceutical and biotech CEOs regarding the potential of AI in their businesses, suggesting Veeva is a foundational enabler of AI adoption in the life sciences.

The discussion delves into Veeva's robust financial performance, noting a substantial increase in net income, up 36% to $714 million, and impressive operating margins of 25.2%. Brown points out that the current fiscal year is projected to be the company's most profitable in absolute dollar terms since 2020, underscoring the success of its investment in the Vault CRM platform. From a technical perspective, he identifies the $300 level as a significant resistance point for the stock, with $260-$265 acting as prior resistance that could now serve as support. Brown concludes that if Veeva can break and hold above the $300 mark, it could signal a new leg in its bull market, making it an attractive long position for investors.

Key Takeaways:

• Veeva Systems as an Industry Standard: Veeva has established itself as the de facto CRM platform for drug discovery within the pharmaceutical and biotech industries, making it an indispensable technology partner for companies in these sectors.
• Strategic Platform Independence: A major growth driver for Veeva has been its successful transition from an OEM system built on Salesforce to its own proprietary "Vault CRM" platform, a move that involved significant capital investment but has yielded substantial returns.
• Strong Financial Performance: Post-platform investment, Veeva has demonstrated impressive financial health, with net income up 36% to $714 million and operating margins reaching 25.2%, indicating efficient operations and profitability.
• Enabler of AI in Life Sciences: The speaker suggests that Veeva's platforms are instrumental in helping pharmaceutical and biotech CEOs leverage AI for their businesses, positioning Veeva as a key player in the digital transformation of the life sciences.
• Significant Market Adoption: Veeva continues to secure major clients, including large pharmaceutical companies like Bristol-Myers, affirming its market leadership and the value proposition of its solutions.
• Under-Recognized Market Leader: Despite its critical role and strong performance, Veeva Systems is presented as a company that is not widely discussed or fully appreciated by the broader investment community, potentially offering an opportunity for informed investors.
• Profitability Growth: The current fiscal year is anticipated to be Veeva's most profitable in absolute dollar terms since 2020, reflecting the positive impact of its strategic investments and market penetration.
• Technical Stock Indicators: For investors, the $300 level is identified as a critical resistance point; a sustained break above this could signal further upside, with $260-$265 serving as a key support level for managing risk.
• Value of Proprietary Systems: The success of Vault CRM underscores the strategic advantage and long-term value creation potential of companies investing in and owning their core technology platforms, leading to increased margins and market share.

Tools/Resources Mentioned:

• Veeva Systems
• Vault CRM
• Salesforce

Key Concepts:

• Industry Standard CRM: A customer relationship management platform that has become the widely accepted and dominant solution within a specific industry, in this case, drug discovery for pharma/biotech.
• OEM System (Original Equipment Manufacturer): Refers to a system or product built by one company and then rebranded or integrated into another company's product, as Veeva initially did with Salesforce.
• CapEx (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. In this context, it refers to Veeva's investment in building its own platform.
• Net Income: A company's total earnings or profit, calculated by subtracting all expenses, including taxes, from revenue.
• Operating Margins: A profitability ratio that measures how much profit a company makes on a dollar of sales after paying for variable costs of production, such as wages and raw materials, but before paying interest or taxes.
• Stock Resistance/Support Levels: In technical analysis, resistance is a price level where a rising stock price is expected to pause or reverse due to selling pressure, while support is a price level where a falling stock price is expected to pause or reverse due to buying pressure.
• Bull Market: A market in which share prices are rising, encouraging buying.

Examples/Case Studies:

• Bristol-Myers: Mentioned as one of the major pharmaceutical companies that has recently signed on with Veeva Systems, illustrating Veeva's ability to attract and retain top-tier clients in the life sciences sector.