VeriSign Inc. (
) marched into the earnings limelight after the close on Thursday
to reveal that it booked a huge gain on the sale of its
authentication business. The company has shed more than a dozen
businesses and thinned its employee ranks in recent years, and its
narrowed focus has made it more dependent on its mainstay Internet
As a result of the sale, the company posted a quarterly profit
of $784.9 million, or $4.48 a share, up from $53.6 million, or 28
cents a share, a year earlier. Excluding the sale and other items,
per-share earnings rose to 27 cents from 16 cents as revenue
increased 10% to $172.6 million. Analysts had predicted a profit of
26 cents a share on revenue of $172 million.
The shares of VeriSign initially gapped more than 4% lower this
morning, but quickly recovered and were most recently in positive
territory. In fact, VRSN is up more than 37% since the beginning of
the year. The security remains above key support at its rising
10-week and 20-week moving averages, which have guided the shares
higher since July 2009.
Heading into the earnings announcement, options players jumped
on the stock's puts in an attempt to call a pullback in the shares.
The International Securities Exchange (ISE) has reported 7.3 puts
purchased to open for every one call purchased to open during the
past 52 weeks. This ratio of puts to calls is higher than 92% of
all those taken during the past 12 months.
In addition, the Schaeffer's put/call open interest ratio (SOIR)
for VRSN comes in at 0.84, as put open interest nearly equals call
open interest among options slated to expire in less than three
months. This ratio of puts to calls is higher than 85% of all those
taken during the past year. In other words, short-term options
speculators have been more pessimistically aligned toward the
shares only 15% of the time during the past 52 weeks.
Meanwhile, short sellers are buying back their bearish bets.
During the past month, the number of VRSN shares sold short dropped
by nearly 19%. However, nearly 12 million shares remain sold short,
accounting for 7.2% of the company's total float. A continued
unwinding of these pessimistic positions could help to propel the
Looking in on Wall Street, we find that VRSN has earned nine
"strong buys," two "buys," and six "holds." There is still some
room for potential upgrades following the company's
stronger-than-expected earnings report.