Verisign Earnings: China Headwinds Drag on Domain Growth but Pricing Upside Boosts Sky-High Margins

Wide-moat Verisign reported mixed fourth-quarter and full-year fiscal 2023 results, which came in marginally below our top-line forecasts but surpassed our profitability expectations. The .com and .net domain name base continues to be hindered by weak registration demand in China stemming from economic headwinds, a weaker local currency, and increasingly stringent and burdensome local internet regulation. Following the result, we lower our fair value estimate to $200 per share from $210 as we now factor in a slightly more gradual price realization resulting in lower top-line growth. Nonetheless, Verisign shares continue to screen as fairly valued relative to our updated valuation.