VeriSign Up -2: Analyst Hesitant Over Stock's Valuation
By Peter Loftus
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--With a dearth of appetizing goodies elsewhere in the
technology sector, investors feasted on VeriSign Inc. (VRSN) shares Friday
after the Internet company met second-quarter expectations and issued a
positive outlook for the rest of the year.
In 4 p.m. Nasdaq trading, VeriSign shares rose $6.93 to $54.10 on volume of
about 17.5 million, more than twice the daily average.
The stock was responding to VeriSign's quarterly earnings report issued late
Thursday. The Mountain View, Calif., seller of Web addresses and Internet
security services, said its second-quarter net loss widened to $11.19
billion, or $55.49 a share, from a loss of $452.9 million, or $3.37 a share
a year earlier.
Much of the latest quarterly loss stemmed from a non-cash charge of $9.9
billion to write down a portion of the goodwill for acquisitions made in the
last two years. The biggest purchase was Network Solutions, for which
VeriSign paid $19.6 billion in stock in June 2000.
Excluding the one-time goodwill writedown and quarterly amortization,
stock-based compensation charges and benefit for income taxes, Verisign
earned $52.6 million, or 25 cents a share, compared with income of $10.3
million, or 7 cents a share last year.
On a fully taxed basis, VeriSign would have earned 15 cents a share in the
second quarter, a penny ahead of the Thomson Financial/First Call consensus
estimate. Revenue rose 229% to $231.2 million from $70.3 million in the
year-earlier period, which included only 22 days of Network Solutions
results.
VeriSign executives raised earnings estimates for the third quarter and full
year, and backed existing revenue targets. They said the company's diverse
businesses cushioned it from the technology sector downturn, and cited the
importance of its services to anyone doing business on the Internet.
JP Morgan H&Q analyst Raimundo Archibold said VeriSign "continues to see
solid fundamentals in its businesses."
Bear Stearns analyst Robert Fagin raised his 2001 estimates of earnings
excluding items of 64 cents a share on revenue of $981.2 million from his
former targets of earnings of 63 cents on $980.2 million. That's in line
with the company's new guidance, which calls for earnings of between 60
cents and 63 cents a share on revenue between $975 million and $1 billion.
Despite the general market ebullience surrounding VeriSign, Fagin pointed
out that his "key hesitation" is the stock's valuation. He reiterated his
"attractive" rating.
At recent levels, VeriSign shares are trading at nearly 50 times Fagin's
estimates of VeriSign's 2002 earnings. That's relatively pricey compared
with the rest of the Internet sector.
-By Peter Loftus, Dow Jones Newswires; 201-938-5267; peter.loftus@dowjones.com
(END) DOW JONES NEWS 07-27-01
04:17 PM
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