On Monday, Baird upgraded VeriSign (NASDAQ:VRSN) stock, moving the rating from Neutral to Outperform and increasing the price target to $250, up from the previous $200. The company, currently trading at $191.14, shows strong fundamentals with an impressive gross profit margin of 87.58% and a P/E ratio of 22.24.
The decision comes after a period of underperformance relative to the S&P 500, with VeriSign's shares remaining approximately flat over the past five years compared to a 94% increase in the S&P 500, and a 15% decline since Baird's downgrade in July 2023, during which time the S&P 500 rose by 38%.
Baird's assessment indicates that regulatory concerns which previously weighed on VeriSign's stock have now been resolved, allowing the company to refocus on its domain growth strategy. Recent data suggests improvements in this area, with the company maintaining steady revenue growth of 4.08% and earning a "GOOD" overall financial health score from InvestingPro's comprehensive analysis system.
The upgrade reflects Baird's confidence in VeriSign's potential to benefit from a better macroeconomic environment, the potential for channel marketing plans, and the elimination of pricing concerns that have hindered the stock in the past. These factors are expected to contribute to a higher risk-adjusted multiple for the company.
Baird has also introduced estimates for the year 2026, updated long-term free cash flow (FCF) scenarios, and raised the price target to reflect the anticipated improvements. This new price target of $250 represents Baird's revised expectation for VeriSign's share value, suggesting a bullish outlook for the stock moving forward.
In other recent news, VeriSign has seen a series of significant developments. The company reported a modest revenue growth of 3.8% in its third-quarter 2024 results, reaching $391 million. This was accompanied by a 13.1% increase in earnings per share, which rose to $2.07. VeriSign also maintained a stable liquidity position with $645 million in cash and repurchased 1.7 million shares for $301 million during the quarter.
Citi reaffirmed its Buy rating for VeriSign and set a price target of $210.00, following the renewal of the company's Cooperative Agreement with the National Telecommunications and Information Administration (NTIA). The renewal of this agreement, which governs the pricing of .com domains, was seen as a notably positive event for VeriSign by Citi.
In addition, VeriSign recently renewed its .com Registry Agreement with the Internet Corporation for Assigned Names and Numbers (ICANN). The renewed agreement introduces provisions to enhance the security and stability of the .com Top-Level Domain. These recent developments are part of VeriSign's ongoing efforts to navigate a challenging market environment.
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