Chip giant Nvidia’s (NVDA) impact in the artificial intelligence (AI) sector is indisputable. With a 90% share in the graphics processing unit (GPU) market, Nvidia’s prominence in the burgeoning AI market will only increase.
Consequently, the Jensen Huang-led company has been the partner of choice for companies seeking to enhance their AI capabilities. While big partners like Meta (META) and Microsoft (MSFT)-backed ChatGPT have captured the attention of investors, Nvidia’s partnership with an under-the-radar healthcare company may be equally consequential.
About Iqvia Holdings Stock
Formed in 2016 through the merger of Quintiles and IMS Health, IQVIA Holdings (IQV) is a leading global provider of advanced analytics, technology solutions, and clinical research services to the life sciences industry. Valued at a market capitalization of $36 billion, the IQV stock is down 7.5% over the past year.
Notably, IQVIA is partnering with Nvidia to use its Nvidia AI Foundry for creating custom foundation models based on its vast data and expertise. It is also developing agentic AI solutions to advance its applications in healthcare and life sciences.
Now, let’s have a closer look at what is making analysts bullish about the Durham, North Carolina-based healthcare company.
Steady Financials
The results for IQVIA’s most recent quarter were encouraging, with both revenue and earnings surpassing estimates. Net sales for the third quarter came in at $3.9 billion which denoted growth of 4.3% from the previous year, while earnings went up by 14.1% in the same period to $2.84 per share. Impressively, this marked the 15th consecutive quarter of earnings beat from the company.
IQVIA ended Q3 with an order backlog of $31.1 billion , which is up 8% year-over-year.
Net cash from operating activities also moved higher for the first nine months of 2024 at $1.8 billion compared to $1.4 billion in the year-ago period. Free cash flow also increased by 49% from the prior year to $1.4 billion as the company closed the quarter with a cash balance of $1.6 billion. However, its cash balance is lower than its short-term debt levels of $4.6 billion, which is concerning.
Meanwhile, the stock continues to trade at reasonable levels with its forward price-earnings ratio coming in at 18.88x and its forward price-sales coming in at 2.38x. Both are lower than the industry averages.
Bright Prospects
Despite the muted share price performance, IQVIA’s long-term growth story remains strong, supported by a substantial backlog and positive indicators like RFP flow and pipeline expansion, which could help meet revenue targets.
The company is well-positioned to benefit from the rising need for understanding population-specific health differences and increased demand for localized clinical trials. As a leading global provider of advanced analytics, technology, and clinical research services, IQVIA generated approximately $15 billion in revenue in 2023, with 87,000 employees operating in over 100 countries.
AI presents significant opportunities for IQVIA, potentially boosting the number of drug candidates entering trials. The company currently oversees around 2,500 clinical trials, with late-stage R&D (Phase IIb and Phase III) projected to grow at 7.5% annually and Phase IV at 7%.
Analyst Opinions on IQV Stock
Analysts have attributed an overall rating of “Strong Buy” for the stock with a mean target price of $248.96 which denotes upside potential of about 26% from current levels. Out of 22 analysts covering the stock, 17 have a “Strong Buy” rating, 2 have a “Moderate Buy,” rating and three have a “Hold” rating.
