Verisign Sees Steady Increase in Domain Registrations
Verisign (NASDAQ:VRSN) announced its Q3 FY2011 earnings, reporting a 14% increase in revenues year-over-year. It reported that it has added close to 2 million net new subscribers (.com and .net) bringing the total base of registered .com and .net domains to 112 million. [1] We predict that it will end the year with slightly less than 114 million registered domains and expect its share of the total registered domains to be close to 50% in 2011, showing a steady decline throughout the forecast period.
See our complete analysis of Verisign here
Verisign’s revenue growth is a direct function of the increase in the number of registered .com and .net domain names, for which it is the exclusive domain registrar. Following the earnings, we have revised our Trefis price estimate for Verisign to $37, which stands nearly 5% above its current market price.
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The revenue also depends on the renewal rate, which is the percentage of customers who renew their domains, and the number of total new domain registrations. The renewal rate has remained largely steady over the years at around 73% – 74% while the number of new domains registered this quarter were close to 7.9 million, up 5% year-over-year.
We expect this trend to continue with Verisign continuing to steadily add to its active customer base. Though the share of .com/.net domains is expected to decrease, the total number of domain names globally will increase at a much faster rate, buoying up Verisign’s revenues. You can tweak this chart to see how an increase in the number of domain names globally impacts Verisign’s Trefis price estimate.
Verisign competes with other domain name registry providers like NeuStar, Employ Media, and Afilias to win new and maintain existing registry rights. Its .com and .net domain registration business accounts for nearly 90% of its $37 Trefis price estimate.
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