Comment Updates: Mission Critical Companies
The MyWallSt analyst team is constantly monitoring the stocks on our shortlist and reassessing our investment theses. Over the past few days, we’ve updated our comments on the following companies:
A long-term favorite in MyWallSt, Veeva Systems (VEEV) provides cloud solutions to the life-sciences industry. The company was founded by Peter Gassner, who, when working for Salesforce, saw the opportunity to build a dedicated solution for pharmaceutical companies. Built on the Salesforce One platform, Veeva’s CRM solution was an immediate success, and now counts 80% of the industry as clients. From there, the company has built out a suite of products that help life science companies protect their valuable IP and comply with regulatory requirements.
However, in recent years, growth of those products has slowed somewhat, leading investors to question Veeva’s high multiples. It seems Veeva has become a victim of its own success and is now finding it hard to maintain high growth in a saturated industry. The company has long believed that it can eventually move outside life sciences and has reformulated its products for other highly-regulated industries, like cosmetics and agriculture.
Management also believes that it has significant opportunities in clinical data management and are even exploring the direct-to-patient market — which is expected to grow exponentially over the next ten years.
There are few modern businesses that can survive today without a robust cloud strategy. The infrastructure behind such a strategy is typically provided by one of the major cloud companies, like Google, Microsoft, or Amazon.
These are the customers that Arista Networks (ANET) targets — major cloud businesses with millions of clients further down the chain. Arista makes network switches, mission-critical to the success of these clients. That’s what’s turned it into a $38 billion company in the 17 years since it was founded. Even more impressive is the fact that it has achieved this by going after one of the biggest technology juggernauts in the world — Cisco.
Arista’s success is born out of a constant culture of innovation. The three founders were all engineers and all had extensive experience in launching successful technology firms. Those three founders are still with the company today — and all three have a large percentage of their personal wealth tied to Arista’s continued success.
Despite serious macroeconomic headwinds like supply chain issues and increased component costs, Arista is still blowing past expectations. In June this year, the company announced 49% revenue growth, well past the top-end of its own guidance.
There are still risks with this business though. Major clients like Meta Platforms and Microsoft are responsible for an outsized percentage of their sales, and new technologies could emerge that would challenge the company’s competitive advantage. For now, the market seems to be ready to put its money on Arista as a long-term compounder.