Verisign ( VRSN ) posted solid earnings on continuing growth in its user base despite the rising popularity of other top level domains. The company recently renewed its contract with ICANN to be the authoritative registry operator for .net domains for 6 more years. It also announced an anticipated price hike for .com and .net domains, which we have already factored in our model. Upside to our forecast could arise from market share gains as new rules will allow businesses to register any domain name. This could lift our forecast for total user base of .com and .net domain names that we currently expect to increase from ~120 million this year to around 350 million by the end of our forecast. The company is also followed by investors in Internet security names like Symantec ( SYMC ) and Intel's Mcfee ( INTC ) among others.
We have revised our Trefis price estimate for VeriSign to $36 , accounting for the lower net cash balance and implies a 10% upside to the current stock price.
More Domain Names to Impact Verisign's Market Share
Aside from the growth in its tradition domain names business, Verisign will gain as organizations start to register their own domain names called general top-level domain names or gTLDs - think .google, .apple, etc. ICANN recently approved a plan to increase the number of generic top-level domains. This will open up opportunities for an organization to register its own top level domain, starting January 12, 2012.
If Verisign is able to attract new business by offering domain registrar services to the organizations applying for new gTLDs, that could mean a whole new revenue stream which will compensate for the decreasing growth in .com/.net domain name registrations. On the other hand, if it isn't able to attract new business for the new gTLDs, it could end up losing market share.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.