Verisign (NASDAQ:VRSN) is a relatively stable stock which has remained largely in the $30 – $34 range in the past quarter with few large movements. Its business is driven almost entirely by its .com and .net domain registration business for which it acts as the exclusive domain registry. Domain registrations (.com and .net) account for nearly 90% of its $37 Trefis price estimate. It competes primarily with other domain name registry providers like NeuStar, Employ Media, and Afilias to win new and maintain existing registry rights. Our current $37 Trefis price estimate for Verisign stands nearly 20% above its current market price.
Domain Registrations, Domain Registrations, Domain Registrations!
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It announced its Q3 FY11 earnings last week, announcing a 14% increase in revenues thanks to a steady increase in domain registrations, following which its stock jumped nearly 10%.
We expect it to continue to keep adding customers throughout the forecast period, growing its overall customer base despite a decrease in the share of .com and .net domains as a percentage of total domains, as the total number of domain registrations increase at a faster rate.
Last week, there were a couple of developments which could impact Verisign’s stock marginally. Verisign launched a new tool to search available domain names – DomainFinder – which allows users to find their desired domain and check whether it’s available, along with the DomainScore of the domain name which indicates how much traffic it gets.  Presumably, Verisign is hoping that it’ll drive domain registrations, but we doubt it will have much of an impact.
Next, Verisign announced that its authentication business which was acquired by Symantec (NASDAQ:SYMC) earlier will complete the transition in April 2012. All Verisign SSL ceritifcates will be Symantec SSL certificates, followed by some other branding changes.
In the next quarter, Verisign will will bump up the prices of .com domains by 7% and .net domains by 10%. We have already factored these price increases in our estimates, and we don’t expect it to impact sales much.Notes: