VeriSign (VRSN - Free Report) released a proposed agreement with the Internet Corporation for Assigned Names and Numbers (ICANN) to amend the .COM Registry Agreement.
Additionally, the parties also announced a new proposed framework for working on initiatives related to the security, stability and resiliency of the Domain Name System.
The new terms are now open to public comment.
Proposed Terms of the Agreement
The agreement would allow Verisign to increase prices by 7% in each of the last four years of each six year contract renewal. This is in line with an agreement Verisign struck with the U.S. government to amend the Cooperative Agreement in 2018.
Additionally, the wholesale price of a .com domain has been proposed to increase from $7.85 to $10.26 over the next four years, and registrars will add their own mark up.
Notably, ICANN is not a price regulator and depends on the U.S. government for .com prices. The price increase from the current wholesale price of $7.85 to the maximum price of $10.26 in 2024 represents annual increase of $2.41.
ICANN has been a price regulator in the past though it recently abdicated this role, per a Domain Name Wire Report. Verisign’s contract renewal will give ICANN an opportunity to increase its revenues. The company will pay it an additional $20 million over the next five years as part of its new agreement.
Domain Registration Prospects
VeriSign is benefiting from growth in .com and .net domain name registrations. Recently, the company announced that the third quarter of 2019 closed with 359.8 million domain name registrations across all top-level domains (TLDs), up 5.1 million or 1.4% sequentially. Domain name registrations have grown 17.4 million or 5.1% year over year.
Notably, VeriSign benefits from its “exclusive” contract with ICANN for .com, .net and .name generic top-level domains (gTLDs). It is the sole registry operator for the .com and .net domain names through Nov 30, 2024 and Jun 30, 2023, respectively.
The renewal of the .com contract and price hikes for the .com and .net domain names remain drivers of VeriSign’s top-line growth. An expected increase in domain name base is the key catalyst.
VeriSign now anticipates domain name base growth rate to increase between 3.2% and 3.7%, up from the prior guidance of 3-4.25%. The rise in Internet domain name registrations is expected to help the company achieve this target comfortably.
Moreover, 2019 revenues are expected to be in the range of $1.228-$1.233 billion compared with the earlier-guided figure of $1.225-$1.235 billion.
Zacks Rank & Other Stocks to Consider
VeriSign has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector include NetEase, Inc. (NTES - Free Report) , Fortinet, Inc. (FTNT - Free Report) and Perficient, Inc. (PRFT - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for NetEase, Fortinet and Perficient is projected to be 41.9%, 14% and 11.7%, respectively.
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