Keeping VRSN A Hold

We maintain our hold recommendation on the shares of Verisign Inc. (VRSN - Analyst Report). The company provides essential Internet infrastructure services to companies, service providers and website owners.

VRSN earlier posted Q3 revenues of $240 million, in line with our estimate of $240 million (consensus at $239 million). Non-GAAP EPS of $0.25 included a $0.03 investment loss due to the Lehman bankruptcy. Excluding this loss, EPS would have been $0.28, better than our estimate of $0.27 and consensus of $0.26. Going forward, Management provided Q4 revenue guidance of $242 $247 million, slightly below our and consensus estimates. Management remains confident of exiting 2008 with an operating margin of 35%.

The company is trading at 19.7 times our slightly reduced 2008 pro-forma earnings estimate of $0.99 per share. We maintain our target price of $21, which is derived by applying a target P/E multiple of 21.2x to our 2008 EPS estimate.

Read the full analyst report on VRSN