The pandemic may have caused havoc across various sectors of the economy. However, it has proved to be a robust tailwind for the digital economy. Not only are people spending more time online due to work from home, but the internet itself is expanding. VeriSign, the dominant global provider of internet infrastructure and domain name registry service, recently disclosed that it has ended the second quarter of 2020 with 370.1 million domain name registrations, a 4.3% growth on a Y-o-Y basis.
What makes VeriSign one of the best tech stocks 2020
VeriSign is a sort of a “toll road company” of the internet. It collects an annual fee for every .com and .net domain name that is registered. There are hundreds of millions of such domain names around the world. So, the fee is recurring and growing. The company does this because it is a domain name registry. It is like a directory for the internet and points people to the correct website whenever they type a URL in their browsers. VeriSign also operates two major root servers and ensures the proper functioning of the root-zone for the Domain Name System or DNS. VeriSign’s cash stream is predictable, stable, and represents a healthy moat within the internet industry.
Financial Performance of VeriSign
VeriSign has seen its net income grow from around $375 million in 2015 to $612 in 2019. Its operating margins have grown from 57% in 2015 to 65% in 2019. Return on assets has also jumped from 16% in 2015 to 32% in 2019. VeriSign is a high-margin, asset-light, and a monopoly-type of a business.
VeriSign’s stock is up 2.68% year-to-date. However, over the past 5 years, the stock price has grown from around $70 per share to $202 per share. In fact, the stock has grown almost 10X over the last decade. That makes it an internet security stock to buy.