During the October 7 episode of Mad Money, Jim Cramer discussed Veeva Systems Inc. (NYSE:VEEV) as an example of a software business that had recovered from fears about AI disruption, as he said:
Take Veeva Systems, the best of its business, makes software for the pharma and biotech industries. Their platform helps capture the whole clinical trial process where mistakes have really serious consequences. So this was never going to be an easy business to disrupt.
Cramer had previously linked Veeva’s rebound to a change in the trading pressure surrounding enterprise software. His August explanation adds another dimension to why shares recovered while the business kept performing.
Major Drugmakers Commit to Vault CRM
Recent customer announcements support Cramer’s comment that Veeva Systems Inc.’s specialized software remains relevant. Eli Lilly committed to deploying Vault CRM globally in August, followed by Amgen’s announcement in September. Both relationships involve moving established customers onto Veeva’s newer commercial platform. Cramer also emphasized that Veeva is incorporating AI into its products, as he said:
They’re also using AI themselves to handle repetitive tasks for customers… What an amazing comeback of the stock. But the business was always great.
The company’s fiscal second-quarter announcement described new standard AI agents, expanded capabilities for existing agents, and more advanced tools for customers to develop their own. Management also highlighted accelerating activity in Veeva Falcon and a record quarter for Vault CRM.
For the quarter ended July 31, revenue increased 18% to $928 million, including 16% subscription growth. GAAP operating income rose 40% to $275 million, and adjusted diluted EPS increased to $2.35 from $1.99. The company’s updated full-year outlook calls for approximately $3.68 billion in revenue and adjusted diluted EPS of approximately $9.21. The 40% increase in operating income deserves a closer look before treating it as a sustainable growth rate. An earlier examination of Veeva’s margin expansion identified a prior-year expense that changes the comparison.
The Recovery Has Restored a Valuation Premium
Veeva Systems Inc. trades at approximately 29.7x forward earnings, compared with 15.5x for Salesforce. Veeva’s industry focus distinguishes the businesses, but the premium is substantial given their competition in life-sciences customer relationship management software. Cramer’s praise for the business has not always translated into willingness to buy the shares. In his earlier assessment of two software comebacks, he drew a distinction that led him to favor one over the other.
Winning large customers does not remove the work of deploying the platform successfully. Veeva identifies product performance, security, customer priorities and changes in life-sciences funding and regulation as business risks. Its growing AI offering also needs to deliver the efficiencies customers expect. Between March 30 and October 5, Veeva returned 61.1%, compared with 42.3% for Insider Monkey’s Billionaire Index and 23.2% for SPY.
Hedge Fund Ownership Was Nearly Unchanged
Insider Monkey tracked 61 hedge funds holding Veeva Systems Inc. in Q2, compared with 62 in Q1. Short interest stood at 3.35% of float. The one-fund decline indicates little change in participation, though these holdings predate the August earnings release and subsequent rally.
Cramer’s comment highlights a business that continued winning customers while investors worried about its future. Those fears have eased, and the share price now reflects much more confidence. From here, successful deployments and further earnings growth will matter more than another reversal in software sentiment.
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