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The Company operates intelligent infrastructure services that enable and protect billions of interactions every day across the world's voice and data networks.
Pros:Steadily increasing cash flow, and revenue. Good fundamentals. Practically has a monopoly on internet domains. ICANN also granted VeriSign the rights to raise the pricing up to 7% per year. Although 7% is only 42 cents the first year, VeriSign controls nearly 66 million domain addresses. They have a potential for large growth in the future as they have the infrastructure to appoint an IP address to every RFID tag and serve as the industry's defacto standard. CEO Stratton Sclavos will be replaced by two new executives that will bring fresh blood and renewed vigor to it's well established markets. Verisign will be approaching $1.8 billion in revenues for 2008 and will be a prime cadidate for a private equity buyout.Cons:Options back-dating issues: VeriSign will have to re-state its numbers from 2002 through the first quarter of 2006 due to back-dating options. Google and GoDaddy may pose a threat to Verisign's current monopoly on domain name registration.
New CEO, William Roper, has a strong accounting background and plans to focus on making VRSN more efficient. Due to their monoploy on .com and .net domains and high operating margins, I expect VRSN to beat 2007 earnings estimates of $1.07 by 50% and to grow earnings by another 20-30% for 2008. Additionally, with such a high cash flow, I think they will be a prime private equity buyout candidate, or maybe even by Google?
Hopefully you guys didn't lose too much money believing those insane growth projections.Actual 2007 earnings: -$0.60First half 2008 earnings: -$0.40Year over year revenue growth: -16%Debt to equity: 2.8This pig needs to fall 80% further.
S&P RAISES OPINION ON SHARES OF VERISIGN TO STRONG BUY FROM BUYThe shares have fallen 23% since a recent high set within the pastmonth, and we now think they are compellingly valued. We believeenthusiasm related to the company and stock have been shaken by therecent reinstatement of antitrust lawsuit against VRSN, related toits .com registry. We think this situation could take years toresolve. Moreover, we do not believe there is a high risk that thecompany will lose this critical franchise. Perhaps, over the long-term, .com pricing would increase at a lower rate. We keep our DCF-driven 12-month target price at $24.
With a PEG of only .03 and a current ratio of 2.13 this seems to be both cheap and financially sound. Tough combination to beat.
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