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VeriSign Inc VRSN

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Stock XNAS Rating as of
$184.10 +7.36 (4.16%)
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Company Report

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Verisign Earnings: Continued Pressure on Domain Base as Pricing Upside Falls to Bottom Line

Emma Williams

Following second-quarter results, we lower our fair value estimate for wide-moat Verisign to $195 per share from $200 as domain registration headwinds persist longer than anticipated. The .com and .net domain base continues to be hindered by soft registration demand in China and lower demand from US registrars who have pivoted to raising retail prices and pulling back on marketing to target new customer growth. Our updated valuation accounts for lower domain growth over the medium term and higher expenditure on marketing programs to propel domain registration growth back to positive territory by 2025.

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Price vs Fair Value

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VRSN is trading at a 179% premium.
Price
$184.10
Fair Value
$528.00
Uncertainty
Low
1-Star Price
$165.54
5-Star Price
$931.00
Economic Moat
Jlqx
Capital Allocation
Ylrjbrmd

Bulls Say, Bears Say

Bulls

We expect Verisign to maximize price increases for the .com domain within the contractual limits, supporting further margin expansion.

Bears

While highly unlikely, the potential loss of the .com and .net contracts would lead to material value destruction for shareholders, given these contracts underpin practically all Verisign’s income.

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Trading Information

Previous Close Price
$176.74
Day Range
$174.60–184.22
52-Week Range
$167.05–220.91
Bid/Ask
$183.42 / $184.39
Market Cap
$18.34 Bil
Volume/Avg
1.3 Mil / 774,246

Key Statistics

Price/Earnings (Normalized)
23.01
Price/Sales
11.70
Dividend Yield (Trailing)
—
Dividend Yield (Forward)
—
Total Yield
6.14%

Company Profile

Verisign is the sole authorized registry for several generic top-level domains, including the widely utilized .com and .net top-level domains. The company operates critical internet infrastructure to support the domain name system, including operating two of the world’s 13 root servers that are used to route internet traffic. In 2018, the firm sold off its Security Services business, signalling a renewed focus on the core registry business.
Sector
Technology
Industry
Software - Infrastructure
Stock Style Box
Mid Core
Total Number of Employees
908
Website
https://www.verisign.com

Competitors

Valuation

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Metric
VRSN
GOOGL
SQSP
Price/Earnings (Normalized)
 23.0124.1671.95
Price/Book Value
 —6.85—
Price/Sales
 11.706.415.67
Price/Cash Flow
 19.4617.4037.31
Price/Earnings
VRSN
GOOGL
SQSP

Financial Strength

Metric
VRSN
GOOGL
SQSP
Quick Ratio
 0.591.900.54
Current Ratio
 0.642.080.70
Interest Coverage
 13.87281.771.70
Quick Ratio
VRSN
GOOGL
SQSP

Profitability

Metric
VRSN
GOOGL
SQSP
Return on Assets (Normalized)
 53.61%26.65%9.56%
Return on Equity (Normalized)
 —37.68%—
Return on Invested Capital (Normalized)
 658.70%33.14%28.62%
Return on Assets
VRSN
GOOGL
SQSP
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