Veeva Systems’ Recovery Likely to be Temporary

Veeva Systems is a cloud solutions provider to the global life sciences industry. Think pharmaceuticals and biotech. A quick look at the Veeva’s financial statements reveals that the company has all the characteristics of a great business. Revenue is rising by over 25% a year and so are profits and free cash flow. Margins are high and debt is close to zero. The stock price reflects these strong fundamentals and is up 453% since the company’s 2013 IPO.

But the current price of $210 a share is actually 39% lower than VEEV’s all-time high. In August, 2021, Veeva Systems stock reached a record of $344 a share. Two months ago, in May, 2022, it dropped as low as $152. Obviously, strong sales growth, a fortress balance sheet and high profits still don’t mean Veeva Systems is immune to market crashes.

That is why we’ll use a different approach to determine if the stock is a good buy at $210 or not. The daily chart below allows us to put all of Veeva Systems’ history as a public company into Elliott Wave context.

Veeva Systems Stock Elliott Wave analysis

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The spectacular uptrend from just over $17 in 2014 to $344 in 2021 can be seen as a five-wave impulse. The pattern is labeled I-II-III-IV-V, where the five sub-waves of wave III are also visible. By the way, so is the impulsive structure of wave 1 of III, marked i-though-v.

Another impulsive sequence, but in the opposite direction, can be recognized in Veeva Systems’ decline from $344 to $152. We’ve labeled it 1-2-3-4-5 in wave A. According to the theory, a three-wave correction follows every impulse. This means the bottom at $152 is unlikely to be the end of VEEV’s corrective phase.

Instead, it makes sense to expect only a temporary recovery in wave B, followed by another decline in wave C. Given the hefty valuation of Veeva Systems, we wouldn’t be surprised if wave C drags the stock towards the $100 mark. Then we might be interested.

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