Hold on to Your VeriSign Stock

These days, being part of a pandemic-resistant business model—like pretty much anything internet-related—is a recipe for at least some success. That's been the case with many companies out there, and VeriSign (NASDAQ:VRSN) proved to be a little different, turning in a quarter that contained several winning factors.

A Win by the Numbers

VeriSign turned in wins on several fronts, which drew plenty of interest from potential investors not long after the declaration of earnings hit. The company brought in $1.38 per share in earnings against a consensus projection of $1.29 out of Zacks. Better yet, that not only beat expectations, but it also beat the numbers put up this time last year, which came in at $1.31 per share. Revenue proved to be basically a match, reports noted, with the company bringing in $320.284 million against an expected $320.35 million. Revenue was a beat against last year, however, as the company brought in $310.5 million from the same quarter the preceding year.

Reports noted that the company processed 10.5 million new domain name registrations in both .com and .net extensions. That's up slightly from the same time last year, when the company picked up 10.3 million new registrations.

The company issued no guidance with the numbers, which is a bit distressing, but reports noted that the company added $747 million to its stock buyback program. This brings the total amount available for stock buyback operations to an even billion. That suggests the company at least has cash on hand sufficient to help drive up its own stock price by increasing scarcity of available shares.

A Slightly Improving Analyst Picture

The analyst pool, based on our latest research, is sparse but trending bullish. In fact, there's been very little movement of any sort when it comes to the analyst pool, but it is looking up.

Six months ago, VeriSign was considered a “hold”, with two “hold” ratings and one “buy.” That remained the case into three months ago, and up until a month ago, where one more “buy” rating entered the pool, balancing the case at two “hold” and two “buy” ratings. That is where we hold today, with the pool split between “buy” and “hold” in equal measure.

The price target, meanwhile, has increased in a stair-step fashion along with the consensus rating. Six months ago, the price target sat at $229.67 per share. That's also where it was three months ago. A month ago, when the new “buy” rating hit, the price target went up to $233.75, where it sits today.

Indeed, there has not been a lot of analyst movement on VeriSign in any direction. The last change in the field was back on December 9, when JPMorgan Chase & Co. came in with an upgrade from “neutral” to “overweight” and a price target of $246 per share. Given the company currently trades at $196.30 as of this writing, there's quite a bit of room for upside potential in all of these projections.

Concerning Developments Emerge, But Should They Stop You?

There are some developments in progress, however, that will likely be concerning to those considering investment with VeriSign. The first is that, starting in September, the cost to register a .com domain will increase from $7.85 to $8.39. Not exactly a crippling price hike, but a hike all the same. This may have a positive effect on short-term sales figures as customers rush to buy a domain name, but it might do less pleasant things to longer-term sales numbers as customers bought all the domain names they wanted back before the price hike.

Additionally, there's also the recent revelation about some insider selling to consider: the company's executive chairman and CEO, D. James Bidzos, sold 6,000 shares of stock back on February 10 for the average price of $201.84 per share, netting him around $1.2 million. There are several potential explanations for a CEO to sell stock, starting with “it's his spending money for the year” and ending with “the company is about to go belly up and he's getting what he can.” The fact that Bidzos sold stock before the likely gain that would have been realized from a stock buyback program that could pull around five million shares out of circulation is what's particularly noteworthy.

In the end, though, VeriSign looks like a good option to hang onto and see how some of the upcoming issues work themselves out. Certainly, short-term performance looks great; a buyback and an upcoming price hike on its key product suggest good news for the company in the next three to six months. Going out beyond that, though, looks a bit sketchier, so if you're planning to sell, put it off for a little while.