According to Goldman Sachs, a confluence of positive factors could lead to strong gains for Viva Systems, a cloud-based software provider for the life sciences industry. Goldman began coverage of the stock with a buy rating and a price target of $253 per share, which is up about 34% from Wednesday’s close. The company is set to benefit from a combination of its more mature customer relationship management (CRM) business, which Goldman sees as expanding its “competitive moat” and other rapidly growing add-ons and R&D. “We believe the company is successfully leveraging its dominant position in CRM to cross-sell CRM add-ons and is funding its efforts to expand into software for R&D use cases, where we expect to see increasing momentum over the next 2 years,” said analyst Gabriela Borges in a note on Wednesday. Veeva’s CRM solution was its flagship product when the company launched in 2007 and was the primary driver of growth through the company’s IPO in 2013. Borges also said that Veeva’s margins are “best” and the firm expects free cash flow to be “mostly”. Ranged” between 35% and 40%. “Viva has already been able to execute 35-40% EBITDA and FCF margins, while maintaining 25%+ growth, showing the strength of the business model and the company’s execution,” Borges said. Going forward, we expect FCF to grow essentially in line with revenue as Veeva continues to invest in new products that can drive revenue growth for years to come. Said Goldman analysts believe the free cash flow margin for the CRM business is even higher than the corporate average of 40%. Veeva’s shares have struggled this year, falling more than 26% in that time. —CNBC’s Michael Bloom contributed reporting.
