Eric Savitz (Barron's) submits: Giving thumbs up to VeriSign’s (NASDAQ:VRSN) deal to sell 51% of its Jamba mobile content business to News. Corp. (NASDAQ:NWS), RBC Capital’s Robert Breza raised his rating on the stock on Friday to Outperform from Sector Perform.
The deal “removes an often hard to predict revenue and earnings stream,” he says of the sale of the home of Crazy Frog. “In our opinion, when investors begin to understand the ‘apples to apples’ comparison of VeriSign excluding Jamba, they will envision a more stable company with margin expansion potential and a more stable growth rate.”
Breza provided a list of potential catalysts for the stock:
* Increased .com and .net pricing of ~7% and ~10% respectively (likely within the next month or so).
* Integration of the GeoTrust acquisition to take advantage of VRSN’s efficient infrastructure while expanding upon GeoTrust’s selling channel.
* The mobile B2B business including the SMS and MMS businesses to significantly improve beyond investor expectations as News Corp. becomes its largest customer and new customer Verizon begins to contribute.
* VeriSign has remained committed to improving operating margins towards 25%.
* Historically, the company has repurchased shares in the $23 range.
Breza predicts profits of 96 cents a share this year and $1.07 in 2007 - but says he “would not be surprised” if the 2007 number topped $1.20. He is not, by the way, the only one who likes the stock.
On Friday, September 15, VeriSign was up $1.04 to $21.64.
VRSN 1-year chart: