Will Domain Name Registrations Drive VeriSign’s Q4?

by Trefis Team
-11.70%
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Market
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Trefis
VRSN
VeriSign
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VeriSign (NASDAQ:VRSN) has had a decent year so far. With three quarters reported, the company’s revenue growth year to date has been just over 4%, and we expect this trend to continue when the company reports its fourth quarter earnings on February 7. We believe this growth will be primarily driven by solid growth in domain name registrations for .com and .net, coupled with expected hikes in renewal rates. In addition, its deal with NeuStar -t o sell the customer contracts of its Security Services business – should further drive its growth in the coming quarters.  This deal, coupled with the company’s leading position in the highly regulated domain industry, is expected to drive its value in the coming quarters. Below we take a look at what to expect from VeriSign’s Q4.

We have a price estimate of $160 per share for the company, which is lower than its current market price. View our interactive dashboard – what to expect from VeriSign in Q4– and modify the key drivers such as revenue and margins to gauge the impact on the company’s valuation.

VeriSign controls the rights to the exclusive registry of .com and .net Internet domain names. As a result, the company is expected to witness a rise in its domain name registrations driven by a strong internet adoption rate, global economic growth, e-commerce activity, and registrar go-to-market strategies. The company expects its domain name base to grow between 0.9 and 1.4 million net registrations during the third quarter. However, given its track record, we expect the company to comfortably beat this guidance. We expect this growth in registrations to boost its revenue growth for the quarter. Further, being the sole registry operator for the .net registry for the next 5 years, VeriSign has the contractual right to increase the fees by up to 10% each year until June 30, 2023. As a result, the company is likely to enjoy better pricing in the coming quarters, which will drive its value going forward. In addition, its deal with NeuStar for the sale of its customer contracts related to its Security Services business should allow VeriSign to focus on its core business and reinvest the additional cash flows into its business. Owing to the above factors, we expect 4% revenue growth for full-year 2018 to $1.2 billion, driven by 3% growth in domain registrations and 1% growth in average price per domain.

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