Verisign Heads to $38 Charging More for Domain Names

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Verisign ( VRSN ) recently renewed its contract with the ICANN (Internet Corporation for Assigned Names and Numbers) to serve as the exclusive provider for .net domain names (see: ICANN Renewal Bumps Verisign Shares Higher ). It is currently the exclusive registrar for .com and .net domain names worldwide and competes with other domain name registry providers, such as NeuStar ( NSR ), Employ Media, and Afilias to win new and maintain existing registry rights from ICANN. Its domain registration business accounts for almost 80% of its Trefis price estimate .

Today, Verisign announced an increase in .com and .net domain name fees. As of January 15, 2012, the registry fee for .com domain names will be increased by 7% from $7.34 to $7.85 while the registry fee for .net domain names will be increased by 10% from $4.65 to $5.11. This is in accordance with its agreements with the ICANN, which allows it to hike .com domain prices by up to 7% in four years of that six-year contract and .net domain prices by up to 10% every year of that contract

Implications for Verisign's Stock

We currently have a $38 Trefis price estimate for Verisign , which implies a 15% upside to the market price. We had already factored in the price hike in our estimation model and expect it to reach $7 in 2012.

Though the total number of domain name registrations has been rising rapidly, expected to reach 334 million by the end of the forecast period, the market share of .com and .net domain names is expected to decrease to 43% by the end of the forecast period.

While the price hike may give a temporary boost to the stock price in the short term, it may also reduce demand in the long term. You can tweak the price model here to check the impact on the Trefis price estimate.

Check out our complete analysis of Verisign .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets
Referenced Symbols: MSFT , NSR , SYMC , VRSN

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