The increasing digitization of businesses, the growth of internet-connected devices, and the rising importance of online branding have all contributed to the growth of the domain name market in recent years. As more businesses recognize the necessity of a robust online presence, the demand for domain names continues to rise.
Amid this thriving environment, VeriSign, Inc. (VRSN) stands out with its exclusive rights to manage .com and .net domain names. As the sole administrator of .com domains, VRSN controls a critical piece of internet infrastructure, solidifying its position as a highly valuable asset in the digital world.
Apart from that, the company also operates a directory for .name and .cc; and back-end systems for .edu, domain names, having established a monopoly in the domain name market.
By the end of the third quarter of 2024, VRSN reported a total of 169.6 million .com and .net domain name registrations in its domain name base. During this period, the company processed 9.3 million new domain registrations for .com and .net. Additionally, the final renewal rate for .com and .net domains stood at 72.7%.
VRSN’s efforts resonate not only in its offerings but also in its stock performance. The stock climbed 9% over the past three months and delivered a gain of 16.4% over the past six months, closing the last trading session at $206.96.
Now, let us delve deeper into the factors that could shape VRSN’s performance in the near future.
Stable Historical Growth
Over the past three years, VRSN has demonstrated consistent growth across key financial metrics. Its revenue grew at a CAGR of 5.7%, while EBITDA rose at a 6.7% CAGR. Moreover, operational income (EBIT) expanded at a CAGR of 7.4%, Additionally, VRSN’s net income and EPS grew at a CAGR of 12% and 16.6%, respectively.
Strong Financials
For the fiscal 2024 third quarter that ended September 30, VRSN’s revenues increased 3.8% year-over-year to $390.60 million. Its operating income grew 5.9% from the prior year’s quarter to $269.30 million.
Moreover, the company’s net income and EPS rose 6.8% and 13.1% year-over-year to $201.30 million and $2.07, respectively. As of September 30, 2024, VRSN’s cash and cash equivalents amounted to $267.30 million compared to $240.10 million on December 31, 2023.
Favorable Analyst Estimates
Analysts expect VRSN’s revenue and EPS for the fiscal year that ended December 2024 to increase 4.3% and 1.7% year-over-year to $1.56 billion and $8.03, respectively. Moreover, the company exceeded the consensus revenue and EPS estimates in each of the four trailing quarters, which is noteworthy.
For the full fiscal year ending December 2025, VRSN’s revenue and EPS are expected to rise 3.5% and 8.1% from the previous year, reaching $1.61 billion and $8.68, respectively.
High Profitability
VRSN’s trailing-12-month gross profit margin of 87.58% is 72.4% higher than the industry average of 50.82%. Its trailing-12-month EBITDA margin stands at 70.62%, 576.9% higher than the industry average of 10.43%.
In addition, the company boasts a trailing-12-month net income margin of 55.69%, which is significantly higher than the sector average of 3.79%. Also, the stock’s trailing-12-month levered FCF margin of 47.21% outperforms the industry average of 11.39% by 314.4%.
POWR Ratings Reflects Optimism
VRSN’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
VRSN has an A grade for Quality, supported by profitability measures that exceed industry benchmarks. Its B grade for Sentiment is in line with the optimistic analyst estimates.
Within the B-rated Internet - Services industry, VRSN is ranked #10 out of 24 stocks. Beyond what is stated above, we have also given VRSN grades for Stability, Momentum, Growth, and Value. Get all VRSN ratings here.
Bottom Line
Having established a monopoly in the domain name market and owning exclusive rights to manage the highly demanded .com and .net domain names, VRSN stands out as a titan in the industry. As companies increasingly tidy up their online presence, the growth of the company seems to only go up from here.
Considering VRSN’s high profitability, strong financials, optimistic analyst estimates, and strategic market position, now might be the ideal time to consider adding VRSN to one’s investment portfolio.
How Does VeriSign, Inc. (VRSN) Stack Up Against Its Peers?
Although VRSN’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) and B (Buy) rated stocks from the Internet - Services industry:
Upwork Inc. (UPWK)
Similarweb Ltd. (SMWB)
Liquidity Services, Inc. (LQDT)
To explore more A or B-rated Internet - Services stocks, click here.
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VRSN shares were unchanged in premarket trading Thursday. Year-to-date, VRSN has declined 0.00%, versus a 0.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
Does Verisign's Domain Monopoly Make It a Safe Bet for Investors? StockNews.com
