Verisign Q2 Earnings Preview: Can Growth In Domain Name Registrations Continue To Surprise?

by Trefis Team
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Verisign (NASDAQ: VRSN) reports its Q2 results on July 25. In Q1, the company beat consensus expectations on revenue and EPS thanks to a sharp increase in domain name registrations. In Q2, we will be looking out for performance on domain unit growth, pricing strength and the outlook for the rest of the year.

Trefis estimates Verisign’s valuation to be $172 per share, which is roughly 20% below the current market price. We capture trends in Verisign’s Earnings over recent quarters in an interactive dashboard along with our forecast for full-year 2019. You can modify any of the key drivers to visualize the impact of changes on the company’s share price estimate. Additionally, you can see more Trefis technology company data here.

A Quick Look At Verisign’s Revenues

Verisign makes revenue by selling domain name registry services.  The company has only one segment and had total revenue of $1.2 billion in 2018.

Verisign’s Operating Trends Over Recent Years, And Our Expectations For 2019

  • Total revenues reached $1.21 billion in 2018 from $1.14 billion in 2016 – representing an annualized growth rate of 3.1%. Q1 2019 revenue came in at $0.31 billion (2.4% y-o-y), and we expect revenues for full-year 2019 to reach $1.23 billion because of the following trends:
    • Number of domains jumped to 153 million in 2018 from $142 million in 2016, and we expect this key metric to swell to 157 million by the end of the year
    • Average price per domain has shrunk gradually from $8.03 in 2016 to $7.94 in 2018. We expect the trend to continue in 2019, with the average price falling further to $7.86.
  • Gross Profit has increased to $1.02 billion in 2018 from $944 million in 2016 due to an increase in revenues coupled with a reduction in the direct operating costs.
  • Net income reached $582 million in 2018 from 441 million in 2016 primarily due to a reduction in the effective tax rate which boosted the net income margin figure from 39% in 2016-17 to almost 48% in 2018. We expect the figure to increase to over 51% for full-year 2019.

Per Trefis estimates, Verisign’s EPS for full-year 2019 is expected to be $5.36. Taken together with a P/E of 32x, we arrive at a fair value of $172 for Verisign’s stock (shows cash and valuation analysis), which is roughly 20% below the current market price.

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