VeriSign, Inc. (NASDAQ: VRSN) might not be the most popular internet stock any longer. It dates back to the very start of the dot-com era. Many investors may have forgotten all about it since domain registry and security of domains has become so widespread. That does not mean that there has not been a strategic play for Verisign in recent weeks after what had been a very dull 2024 for this stock.
The big news of late was that Warren Buffett’s managers at Berkshire Hathaway Inc. (NYSE: BRK-B) have rekindled the interest with a wave of stock purchases for its GEICO unit and for pensions tied to other Berkshire Hathaway businesses. And now there is a fresh analyst upgrade being added into the mix. Oggonomics wants to see if there is enough upside left to merit further interest for VeriSign as 2025 kicks off.
WHAT VERISIGN ACTUALLY DOES
Most investors may just think of VeriSign as an internet domain registration company. The company operates a Whois domain search, and now it operates the authoritative registries and provides domain registry services. The company actually does not register or renew domain names itself, but it works with domain registrars to register domain names with .com and other registrations.
Another service that VeriSign offers is the Registry Lock service. This gives a greater level of safety for registrants or their hosts to protect their domain names.
The large news in October was that ICANN and Verisign renewed the agreement for Verisign to continue as the Root Zone Maintainer for the Domain Name System for another 8-year term. In short, this makes it a key backbone for all internet traffic — and VeriSign has done this for what is now nearing 30 years.
THE PERFORMANCE
VeriSign shares closed down 0.9% at $205.10 on the first trading day of 2025. While that may not be reassuring to momentum and short-term buyers, longer-term buyers and existing shareholders would likely point out that VeriSign’s stock rose on each of the last 8 trading days of 2024. That’s when the Santa Rally was proving to have been a ghost.
VeriSign’s stock rose only 0.5% for all of 2024 despite the S&P showing a 23% gain and many big tech stocks rising even higher than the S&P. Does this mean there is still a value proposition for the lagging value investors?
Longer-term, VeriSign’s stock went from an incredible growth story to a boring stock stuck in the mud. From 2012 to 2019, the stock rose from about $35 to $220. And it did briefly trade above $250 into late-2022. Its 52-week range is roughly $170 to $210, and its trading band for the last three years has been about $165 to $220. Again, it’s just considered a boring stock.
WARREN BUFFETT JUICES VERISIGN HIGHER
What garnered the big interest was that Berkshire Hathaway’s portfolio managers kept adding to their positions in December. Buffett’s stake went from about 13 million shares up to 13.24 million shares with purchases being spread over 9 days in December.
Berkshire Hathaway’s stake at the end of Q3-2024 was 12.82 million shares, making its 13.34% stake at that time the largest shareholder by several percentage points. Buffett’s team specifically targeted this stock over others, but the nest two largest holders Vanguard (10.9% stake) and Blackrock (8.9% stake) are generally considered to be passive stakes held by index funds and ETFs.
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THE FRESH TARGET UPGRADE
VeriSign has very few analysts which actually cover the stock. Now there is a fresh analyst upgrade that has come in to kick off the 2025 outlook. Citigroup already had a Buy rating on VeriSign but the firm raised its price target to $238 from $210 in that call.
Citi’s prior $210 price target was after the company’s Cooperative Agreement with the National Telecommunications and Information Administration in the Department of Commerce. There had been concerns that the Commerce Department would enforce lower pricing for VeriSign to maintain its pact.
ANOTHER FAIRLY FRESH ANALYST UPGRADE
While the price target upgrade from Citi sounds positive, a more positive report was issued by RW Baird on December 9 — upgrading VeriSign to Outperform from Neutral. The firm also raised its price target to $250 from $200 at that time.
That report lifted the stock to $200.46 from $191.14 the day ahead of the call, and that was several days before the SEC filings showed Berkshire Hathaway buying up more of the stock. Baird had been more cautious for almost 18 months with that Neutral rating, but ahead of its downgrade in mid-2023 it had previously issued a $265 price target.
ELSEWHERE…
CFRA (S&P) has only a Hold rating and $200 price target for VeriSign. Its late-December report is calling for revenue gains of 4.3% in 2024 and 2.9% in 2025. But what should stand out the most here is that CFRA projects its gross margins at 87.5% in 2024 and 88% in 2025. That’s up from 86.8% in 2023 and is based on higher prices and a stable cost structure.
While keeping its margins high, VeriSign is also an acquirer of its own stock via share buybacks. CFRA pointed out that VeriSign spent $301 million to repurchase 1.7 million of its own shares in Q3-2024 alone. The current market cap is above $19 billion, and it ended Q3-2024 with $645 million in cash and short-term investments.
IN THE END…
VeriSign shares were last seen trading down 0.5% at $204.05.
The stock ratings and price targets mentioned in this report are from the firms named in each instance. Oggonomics does not maintain any formal price targets or ratings on VeriSign. This is not intended to be investment advice and is not a recommendation to buy or sell VeriSign or any related stocks.
Oggonomics always reminds its readers and investors that no single analyst report should ever be the sole basis to buy or sell a stock. That decision to buy or sell, or hold or short sell, is up to each investor and the decision should be made with a financial advisor. And there are of course no assurances that any of the price predictions and the scenarios that back the calls up will actually come to fruition.
