Verisign (VRSN) AI Stock Analysis

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Verisign

(NASDAQ:VRSN)

68Neutral

Verisign's strong profitability and cash flow are key strengths, supported by a robust financial performance. However, the negative stockholders' equity raises concerns about leverage. The technical analysis shows upward momentum, but caution is advised due to overbought indicators. The stock is currently trading at a premium valuation, and the outlook from the earnings call is cautiously optimistic despite challenges in the domain name base.

Positive Factors

Domain Growth

Verisign’s domain name base returned to sequential growth for the first time in 16 months, led by an improvement in .com trends.

Regulatory Developments

The renewal of the DOC Cooperative Agreement with current pricing intact is seen as a significantly positive development for Verisign.

Valuation

The valuation is modest with a favorable risk/reward profile, showing more upside reward than downside risk.

Negative Factors

Competitive Pressure

Risks include slowing pace of domain name growth, new gTLDs gaining more traction vs .com, any potential for loss of .com or .net contracts, security breach.

Domain Growth Challenges

Ongoing challenges around .com domain name growth.

Market Pressures

Domain name guidance was modestly trimmed as pressures persist both in the US and China.

Verisign (VRSN) vs. S&P 500 (SPY)

Market Cap

$23.14B

Dividend YieldN/A

Average Volume (3M)947.95K

Price to Earnings (P/E)30.4

Beta (1Y)0.38

Revenue Growth4.31%

EPS Growth1.07%

CountryUS

Employees929

SectorTechnology

Sector Strength40

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)8.00

Shares Outstanding94,600,000

10 Day Avg. Volume1,135,175

30 Day Avg. Volume947,945

Financial Highlights & Ratios

PEG Ratio28.36

Price to Book (P/B)N/A

Price to Sales (P/S)14.85

Price to Cash Flow (P/CF)25.00

P/FCF Ratio24.50

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$267.50

Price Target Upside10.14% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

Verisign Business Overview & Revenue Model

Company DescriptionVeriSign, Inc., together with its subsidiaries, provides domain name registry services and internet infrastructure that enables internet navigation for various recognized domain names worldwide. It enables the security, stability, and resiliency of internet infrastructure and services, including providing root zone maintainer services, operating two of the 13 internet root servers; and offering registration services and authoritative resolution for the .com and .net domains, which support global e-commerce. The company also back-end systems for .cc, .gov, .edu, and .name domain names, as well as operates distributed servers, networking, security, and data integrity services. VeriSign, Inc. was incorporated in 1995 and is headquartered in Reston, Virginia.

How the Company Makes MoneyVerisign makes money primarily through its domain name registration services. The company charges fees for the registration and renewal of domain names under the .com, .net, and other top-level domains it manages. These fees constitute the majority of Verisign's revenue. Verisign has contracts and agreements with registrars worldwide who sell these domain names to end-users, and Verisign collects a fixed fee per domain name registered or renewed. Additionally, Verisign provides cybersecurity solutions, though this constitutes a smaller portion of its revenue. The company's earnings are significantly supported by its long-term contracts with the Internet Corporation for Assigned Names and Numbers (ICANN), which ensure its role as the operator of the .com and .net registries.

Verisign Financial Statement Overview

Summary

Verisign shows strong profitability and cash flow generation, with high margins and efficient operations. However, persistent negative stockholders' equity suggests high leverage and financial risk.

Income Statement

Very Positive

Verisign has demonstrated consistent revenue growth over the years, with a 4.3% increase from 2023 to 2024. The gross profit margin is strong at 87.7% for 2024, indicating efficient cost management. The net profit margin slightly decreased to 50.5% in 2024, but remains robust. EBIT and EBITDA margins are both high at 67.9%, reflecting strong operational efficiency.

Balance Sheet

Neutral

The balance sheet presents a concerning level of negative stockholders' equity, which has been consistently negative over the years, reflecting high leverage. The debt-to-equity ratio is not applicable due to negative equity, indicating financial risk. Despite this, the company maintains a high equity ratio of -146.8% due to negative equity values.

Cash Flow

Positive

Verisign's cash flow is robust, with a 7.8% increase in free cash flow from 2023 to 2024, indicating strong cash generation capabilities. The operating cash flow to net income ratio remains healthy at 1.15, showing good conversion of net income to cash. The free cash flow to net income ratio is strong at 1.11, reflecting efficient cash management.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.56B	1.49B	1.42B	1.33B	1.27B
	Gross Profit
1.37B	1.30B	1.22B	1.14B	1.08B
	EBIT
1.06B	1.00B	943.10M	866.80M	824.20M
	EBITDA
1.13B	1.10B	1.00B	913.41M	886.74M
	Net Income Common Stockholders
785.70M	817.60M	673.80M	784.80M	814.89M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
599.90M	926.40M	980.40M	1.21B	1.17B
	Total Assets
1.41B	1.75B	1.73B	1.98B	1.77B
	Total Debt
1.49B	1.80B	1.79B	1.79B	1.79B
	Net Debt
1.29B	1.56B	1.41B	1.56B	1.39B
	Total Liabilities
3.36B	3.33B	3.30B	3.24B	3.16B
	Stockholders Equity
-1.09B	-1.58B	-1.56B	-1.26B	-1.39B
Cash Flow		Free Cash Flow
874.50M	808.00M	803.70M	754.12M	686.79M
	Operating Cash Flow
902.60M	853.80M	831.10M	807.15M	730.18M
	Investing Cash Flow
286.30M	-97.40M	355.70M	-269.25M	-72.26M
	Financing Cash Flow
-1.22B	-889.80M	-1.04B	-719.13M	-764.88M

Verisign Technical Analysis

Technical Analysis Sentiment

Positive

Last Price242.87

Price Trends

50DMA

236.46

Positive

100DMA

217.51

Positive

200DMA

199.52

Positive

Market Momentum

MACD

6.06

Negative

RSI

74.01

Negative

STOCH

81.12

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VRSN, the sentiment is Positive. The current price of 242.87 is below the 20-day moving average (MA) of 245.41, above the 50-day MA of 236.46, and above the 200-day MA of 199.52, indicating a neutral trend. The MACD of 6.06 indicates Negative momentum. The RSI at 74.01 is Negative, neither overbought nor oversold. The STOCH value of 81.12 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for VRSN.

Verisign Risk Analysis

Verisign disclosed 22 risk factors in its most recent earnings report. Verisign reported the most risks in the “Tech & Innovation” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Verisign Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CHKP	79 Outperform	$23.78B	29.43	30.15%	―	6.22%	6.15%
ZS	74 Outperform	$31.27B	―	-1.21%	―	27.77%	89.39%
GEN	69 Neutral	$15.66B	25.08	27.80%	1.97%	2.64%	-53.16%
VRSN	68 Neutral	$23.14B	30.35	-72.04%	―	4.31%	1.07%
AKAM	67 Neutral	$11.16B	22.24	10.66%	―	4.70%	-7.33%
CYBR	67 Neutral	$17.32B	1,777.39	-5.91%	―	33.10%	-20.31%
Sector *	57 Neutral	$20.31B	10.03	-14.49%	2.79%	5.15%	-23.76%

* Technology Sector Average

Performance Comparison

VRSN

Verisign

242.87

57.44

30.98%

AKAM

Akamai

72.56

-30.91

-29.87%

CHKP

Check Point

213.78

52.05

32.18%

GEN

Gen Digital

24.26

3.72

18.11%

CYBR

CyberArk Software

342.22

93.79

37.75%

Zscaler

195.36

13.95

7.69%

Verisign Earnings Call Summary

Earnings Call Date: Feb 6, 2025 | % Change Since: 10.31% | Next Earnings Date: Apr 24, 2025

Earnings Call Sentiment Neutral

VeriSign demonstrated solid financial performance and operational resilience, maintaining a strong cash position and returning capital to shareholders. Despite challenges in the domain name base and a drop in net income, the company shows optimism for future growth with new marketing strategies and improved renewal rates.

Highlights

Stable Financial Performance

VeriSign reported a 4.3% year-over-year revenue growth, reaching $1.557 billion for 2024, and a 5.7% increase in operating income. The company returned $1.2 billion to shareholders through share repurchases, and maintained a stable financial position with $600 million in cash and marketable securities.

Operational Achievements

VeriSign extended its record of uninterrupted .com and .net resolution to over 27 years, processing over 400 billion transactions daily. The renewal rate for the fourth quarter of 2024 improved to 73.9%.

Positive Market Responses

The company introduced new marketing programs, showing positive response from registrars, and reported an increase in new registrations to 9.5 million for Q4 2024, up from 9 million in the same quarter last year.

Lowlights

Decline in Domain Name Base

The domain name base for .com and .net decreased by 2.1% year-over-year, attributed to declines in the US and China markets.

Decreased Net Income

Net income for Q4 2024 dropped to $191 million from $265 million the previous year, partly due to the absence of prior year tax benefits.

Challenges in China Market

The decrease in domain volumes in China was in line with expectations, but still a concern. The China market now represents only 5% of the domain name base, reducing its impact.

Company Guidance

During VeriSign, Inc.'s 2024 earnings call, the company reported a 4.3% year-over-year revenue growth, reaching $1.557 billion, and a 5.7% increase in operating income, totaling $1.058 billion. The domain name base for .com and .net saw a decrease of 2.1%, equating to 3.7 million fewer names, with specific declines noted in the US and China regions. However, the fourth quarter showed signs of improvement with 9.5 million new registrations, up from 9 million the previous year. VeriSign returned $1.2 billion to shareholders through the repurchase of 6.6 million shares and ended the year with $600 million in cash and equivalents. For 2025, the company anticipates revenue between $1.615 billion and $1.635 billion, with operating income projected between $1.095 billion and $1.115 billion. Capital expenditures are expected to be between $30 million and $40 million, with an effective tax rate of 21% to 24%. Despite challenges, VeriSign remains optimistic about improving trends in the domain name base, driven by new marketing initiatives aimed at enhancing registrar engagement.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.