VeriSign’s (NASDAQ:VRSN) stock has been solid recently after a spate of good news. The stock reached a new 52-week high Wednesday. VeriSign Inc. provides Internet infrastructure services to various networks worldwide and controls the rights to the exclusive registry of.com and .net Internet domain names. It collects a fixed fee each time individuals or businesses register a new .com or .net domain name, or renew the registration of an existing domain name.
The company makes almost all of its revenues from its domain registration business, which accounts for nearly 90% of our $43 Trefis price estimate for VRSN stock. The Trefis price estimate is nearly 7% below the current market price. As the exclusive registrar for .com and .net domains, it competes with other domain name registry providers like NeuStar, Employ Media, and Afilias for registry rights from the Internet Corporation for Assigned Names and Numbers (ICANN).
The company last month successfully renewed its agreements with ICANN for exclusive rights to the .com and .net domain names. The renewed agreements grants the company exclusive rights to manage these domains for another six years with the rights to hike fees by 7% in any four of the six year contract period. With the .name registry agreement due for renewal in August, the prospects for the company seem good.
The market share of the .com and .net domain names is expected to drop over a period of time as institutions move towards domains more in sync with their businesses. Additionally, applicants for 220 new proposed top level domains have signed up with VeriSign for its backend registry services, ever since ICANN announced the plan in June. The number of 220, lower than initially expected, is likely to dip further, given that some of the proposed domains are generic and likely to be contested.
We standby our price estimate of $43 for Verisign.