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VeriSign (VRSN) to Report Q1 Earnings: What's in the Cards?

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VeriSign VRSN is set to report first-quarter 2020 results on Apr 23.

The Zacks Consensus Estimate for first-quarter earnings has moved down 3% to $1.28 per share over the past 30 days, implying 2.3% decline from the figure reported in the year-ago quarter.

The consensus mark for revenues is pegged at $309.3 million, indicating an increase of 0.9% from the year-ago quarter reported figure.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 2.58%.

Let’s see how things have shaped up for the upcoming announcement.

VeriSign, Inc. Price and EPS Surprise

VeriSign, Inc. Price and EPS Surprise

VeriSign, Inc. price-eps-surprise | VeriSign, Inc. Quote

Factors to Note

Growth in .com and .net domain name registrations is likely to have benefited the company’s performance in the to-be-reported quarter.

Notably, VeriSign has been benefiting from its “exclusive” contract with The Internet Corporation for Assigned Names and Numbers (ICANN) for .com, .net and .name generic top-level domains (gTLDs). It is the sole registry operator for the .com and .net domain names through Nov 30, 2024 and Jun 30, 2023, respectively.

Per Amendment 35 to the agreement (dated Oct 26, 2018), VeriSign can raise the maximum price for a .com domain without further DOC approval by 7% in the final four years of each six-year period (the latest six-year period began on Oct 26, 2018).

Notably, the company ended fourth-quarter 2019 with 158.8 million .com and .net domain name registrations, up 3.9% year over year. The figure reflects a net increase of 1.4 million registrations during the quarter.

VeriSign processed 10.3 million new domain name registrations for .com and .net compared with 9.5 million in the year-ago quarter. Markedly, renewal rates are not fully measurable until 45 days after the end of the quarter.

Per VeriSign’s latest “The Domain Name Industry Brief” report, domain name registrations increased 2.4 million or 0.7% sequentially to 362.3 million across top-level domains (TLDs) at the end of the fourth quarter 2019. Domain name registrations increased 13 million or 13.9% year over year.

However, increasing operating expenses related to research and development and sales and marketing are likely to have weighed on the company’s first-quarter bottom-line performance.

Key Developments in Q1

VeriSign released a proposed agreement with ICANN to amend the .COM Registry Agreement on Jan 6, 2020.

The wholesale price of a .com domain has been proposed to increase from $7.85 to $10.26 over the next four years, and registrars will add their own mark up.

Notably, ICANN is not a price regulator and depends on the U.S. government for .com prices. The price increase from the current wholesale price of $7.85 to the maximum price of $10.26 in 2024 represents annual increase of $2.41.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Verisign has an Earnings ESP of +0.40% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are a few other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Pixelworks PXLW has an Earnings ESP of +5.26% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Limelight Networks, Inc. LLNW has an Earnings ESP of +100.00% and a Zacks Rank #2.

Citrix Systems, Inc. CTXS has an Earnings ESP of +1.58% and a Zacks Rank #2.

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