Analyst report: Positive earnings news pumps Wall Street

Exceed Wall Street's third-quarter expectations one day, receive analyst accolades the next.

That continued to be the formula on Thursday, when dozens of financial institutions emphasized bullish outlooks on companies that reported strong quarterly results on Wednesday.

At least 10 analysts drafted favorable reports on VeriSign, a Mountain View, Calif.-based company that sells Internet-security and name-registration services.

VeriSign announced Wednesday that it lost $1.32 billion, or $6.78 a share, compared with net income of $1.57 million, or 1 cent per share, during the same period in 1999, largely because of significant acquisition costs.

Earlier this year, VeriSign bought Network Solutions--which registers dot-com Internet addresses and maintains a database of 19 million addresses--for $15.3 billion.

Third-quarter sales jumped to $173.1 million from $22.8 million, according to a company statement. The most optimistic analysts were expecting roughly $171 million.

Excluding the acquisition costs, VeriSign would have had third-quarter profit of $38.4 million, or 18 cents a share. Analysts polled by First Call/Thomson Financial expected the company to earn 6 cents per share excluding acquisition costs.

The positive surprise sparked a round of applause on Wall Street for VeriSign, despite investors who sold the stock in light of the earnings report.

VeriSign shares got hammered in after-hours trading on Wednesday and were stuck at $134.44 on Thursday morning, down 8.82 percent from Wednesday's closing price.

Well positioned
"We believe that with the company's multiple revenue streams, the introduction of new services, new top-level domain names, additional international character sets for domain names and overall increased usage of the Internet, VeriSign is well positioned to become one of the leading Internet infrastructure companies," Salomon Smith Barney analyst Chuck Jones wrote in a research note issued Thursday morning.

ING Barings, Thomas Weisel and Dain Rauscher Wessels maintained their "strong buy" ratings. A.G. Edwards, Robertson Stephens, Dresdner Kleinwort Benson, UBS Warburg and SunTrust Equitable reiterated "buy" ratings on Thursday.

Analyst Mark Fernandes at Merrill Lynch reiterated his near-term ''buy'' rating and kept his bullish 12-month target price of $210 per share.

Morgan Stanley Dean Whitter, the most cautious financial institution that drafted a report on VeriSign Thursday morning, reiterated a relatively modest "outperform" rating.

Analysts also became boosters Thursday morning for Vignette. The Austin, Texas-based company is one of the largest suppliers of e-business application software for building corporate Web sites.

Vignette announced Wednesday that quarterly revenues increased 355 percent compared with the same period in 1999 and 43 percent sequentially to $110.4 million.

Vignette's operating loss was $9.1 million or 1 cent per share--exactly what analyst Greg Vogel of Banc of America Securities was expecting. Vogel maintained a "strong buy" Thursday on Vignette but lowered his 12-month price target to $40.

"While there must be a discount for risk and the lack of visibility into 2002, we continue to find the current valuation attractive and we are maintaining our "strong buy" rating," Vogel wrote in a research note issued Thursday morning.

Frost Securities, Dain Rauscher Wessels and Credit Suisse First Boston also reiterated "strong buy" ratings. ING Barings and Southwest Securities reiterated "buy" ratings, while ABN Amro maintained its "outperform" rating.

But that didn't seem sufficient to boost Vignette stock, which traded Thursday morning at $25.84, down 11.46 percent from Wednesday's closing price.