VeriSign, Inc. (VRSN), located in Reston, Virginia, specializes in domain name registry services and internet infrastructure, facilitating navigation for prominent domain names. Valued at a market cap of $18 billion, the company plays a crucial role in maintaining the security, stability, and reliability of key internet infrastructure and services, including root zone management.
Shares of software infrastructure titan have underperformed the broader market considerably over the past year. VRSN has declined 15.6% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 31%. In 2024, VRSN stock is down 12.2%, while SPX is up 25.2% on a YTD basis.
Narrowing the focus, VRSN has also lagged behind the iShares U.S. Technology ETF (IYW). The exchange-traded fund has gained about 35.5% over the past year. Moreover, the ETF's 29.6% gains on a YTD basis outshine the stock's losses over the same time frame.
VRSN shares dipped more than 2% on Nov. 22, ending a three-day winning streak, following calls from Senator Elizabeth Warren and Congressman Jerry Nadler for an investigation into the company's pricing practices. The lawmakers' letter to the Department of Justice and the National Telecommunications and Information Administration accuses Verisign of exploiting its monopoly on ".com" web addresses to impose "excessive prices" on customers.
Additionally, Verisign released its third-quarter results on Oct. 24, and its shares dropped by 2.1% in the following trading session. It reported a revenue of $391 million, a 3.8% increase from Q3 2023. Operating income rose to $269 million from $254 million in the prior-year quarter. The company posted a net income of $201 million, with EPS of $2.07.
For the current fiscal year, ending in December, analysts expect VRSN's EPS to grow 13,717.4% year over year. The company's earnings surprise history is robust. It beat or met the consensus estimates in each of the last four quarters.
Among the two analysts covering VRSN stock, the consensus is a "Moderate Buy." That's based on one "Strong Buy" rating and one "Hold."
The configuration has been consistent over the past months.
On Oct. 25, analyst Robert Oliver from Robert W. Baird maintained a "Hold" rating on Verisign with a $200 price target. While the company's Q3 2024 financial results met expectations, Verisign has slightly reduced its domain name growth forecast due to ongoing challenges in the US and China markets. Additionally, the impact of new registrar marketing initiatives is expected to take longer than anticipated, creating uncertainty around year-over-year growth in 2025.
The mean price target of $205 represents a 13.4% premium to VRSN's current price levels. The Street-high price target of $210 suggests an upside potential of 16.2%
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