Earnings Preview: VeriSign

| About: VeriSign, Inc. (VRSN)

VeriSign (NASDAQ:VRSN) is expected to report Q4 earnings after the market close on Tuesday, February 2, with a conference call scheduled for 5 pm ET.


The consensus estimate is 34c for EPS and $260.72M for revenue, according to First Call. The company recently announced that it registered a record number of visitors for online sales during the year-end holidays this year. These numbers indicate an increase in traffic on e-commerce sales.

Analyst Views

Deutsche Bank expects VeriSign to report $261M in revenues and EPS of 34c, slightly below consensus estimates. The firm's domain name system, or DNS, tracker suggests a strong finish to Q4 at 1.7M net adds, which is above their 1.3M forecast. Within the SSL business, Deutsche Bank expects secure socket layer, or SSL, certificates to grow 6% year-over-year to 1.18M, while average selling prices, or ASPs, to decline 7% y/y to $232K per certificate. Deutsche expects deferred revenue of $907M, up 7% y/y, and cash flow of $83M. The firm rates VeriSign a Buy, with a $27 price target. Looking forward: Deutsche Bank says early data indicates good momentum and they currently forecast 1.35M net adds in Q1. For 2010 Deutsche forecasts 5.9% unit growth in the DNS base which may be conservative given near term net add trends. With a growing cash balance of $1.7B in Q4, Deutsche would hope to hear developments around a stock repurchase plan. The firms EPS estimate of $1.39 for 2010 assumes a 39.1% operating margin, and they believe that this margin forecast could prove conservative. Key issues for the conference call: DNS guidance; commentary around a stock buy-back plan; an update on the ICANN agreements; commentary on new growth avenues, and margin expectations for 2010.