On Friday, Citi maintained a Buy rating on VeriSign (NASDAQ:VRSN) stock but reduced its price target to $215 from $236. The adjustment follows VeriSign's first quarter results, which, despite exceeding expectations in revenue and operating income, revealed challenges in domain growth. The company has also revised its full-year 2024 guidance downward.
VeriSign reported a year-over-year decline of 1.3% in domain registrations, with a downward trend of approximately 400,000 domains through April. In response to these figures, management has adopted what Citi views as a more realistic approach to returning to healthier growth trends. This includes resetting mid-term expectations and revamping marketing strategies, especially in the U.S. market, to address current softness.
The company anticipates a turnaround in domain growth by 2025, acknowledging that the reversal of current trends, along with overcoming headwinds from the Chinese market, will require time. In the meantime, VeriSign is exercising cost prudence and has accelerated its share buyback program in the first quarter of 2024, capitalizing on the recent pullback in its share price.
Citi sees potential for significant upside in VeriSign's stock if domain trends show even slight improvements. This optimism is based on the current share price trading at approximately 10 times below its five-year average of 31 times. The firm believes that VeriSign's shares are attractive at current levels and could realize material gains with normalization of trends.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.