How Much Do Changes In Domain Registrations Impact Verisign’s Value?

Verisign (NASDAQ:VRSN) has seen impressive growth in recent years. Its stock price increased by around 45% in 2017, despite a comparatively marginal jump in its top line and bottom line performance through the first three quarters, which is a testament to its prime position in the highly regulated .com and .net domain industry. Earlier in 2017, Verisign renewed its .net Registry Agreement with the Internet Corporation for Assigned Names and Numbers (ICANN), and will remain the sole registry operator for the .net registry for the next 6 years with a contractual right to increase the fees by up to 10% each year. As more and more companies rely on digitally growing their business, Verisign’s strong position in the domain registration market will help it grow in the near term.

We have a price estimate of $104 for Verisign is about 10% below the current market price.

Revenues increased by 2% year-over-year during the first three quarters of 2017, primarily due to an increase in revenues from the operation of the registries for the .com and .net TLDs. This was driven by a 1% increase in the domain name base for .com and the increase in the .net domain name registration fees in February 2016 and 2017 by 10% each. We have created an interactive model that details how changes in the total number of domain name registrations can impact Verisign’s share price. You can modify these assumptions to see their impact on the company’s valuation.

Number Of Domain Registrations

With more and more businesses getting listed on the internet, .com and .net domain registrations have continued to grow to nearly 146 million through Q3,2017 and we expect it to reach around 155.3 million by 2021. However, if the growth rate exceeds our expectations due to the company’s continued marketing spend over recent years, there could be a 10% upside to the Trefis price estimate for VeriSign’s stock if the registration count reaches nearly 169 million. On the other hand, the increase in domain name prices could reduce the demand for .com and .net domain names. There could be a downside of nearly 5% to the Trefis price estimate for VeriSign’s stock if the registration count grows slower than expected and reaches just 148 million.

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