TheStreet.com is reporting that Wells Fargo analyst Gray Powell downgraded Verisign (VRSN) today writing:
VeriSign’s domain name growth appears to be falling a bit lower than the midpoint of second quarter expectations and competition from new gTLDs could be influencing overall growth to some degree.
“The company is tracking toward about 400K domain name additions in the upcoming quarter, which is lower than the 550K guidance midpoint, said the analyst, citing ICANN zone files.”
“The analyst also noted that other domain names that will possibly be more popular haven’t yet been launched.”
“He downgraded the stock to Market Perform from Outperform and lowered his price target range on the shares to $51-$55 from $56-$60.”
TheStreet.com reports that the same analyst said while Google’s (GOOG) recently announced domain program could be a good thing for VeriSign, as small businesses buy more .com and .net web domains, if Google sells higher profile domains at larger discounts or gives them away for free, it could result in more competition to VeriSign’s .com and .net domains starting late next year.
Shares of Verisign are trading down $1.65 a share just over 3% today on the news although it has bounced off the lows of the session which was $48.64
An inforgraphic was also published which appears above.
Unlike almost study I have read, I cannot find in any of the material how many SMB participated in the study, how the study was conducted and what time frame the study was conducted.
According to this survey of small- and medium-sized (SMB) business owners already conducting business online:
4 out of 5 SMB website owners prefer a .com web address over a new gTLD web address.
81% of website owners believe new gTLDs will be confusing to their customers.
77% of SMB website owners prefer a .com web address over a new gTLDs that describes their business.
79% of Internet users would rather visit a .com will confuse customers.
66% of SMB website owners prefer a descriptive, longer .com web address to a shorter new gTLD address.
An overwhelming majority (94%) feel safe visiting a .com while only 33% feel comfortable visiting a new gTLD.
Since 1964, SCORE has helped more than 10 million aspiring entrepreneurs. Each year, SCORE provides small business mentoring, workshops and education to more than 375,000 new and growing small businesses. More than 11,000 business experts volunteer as mentors in over 320 chapters serving local communities with entrepreneur education.
VeriSign, Inc. (NASDAQ: VRSN), today reported financial results for the first quarter of 2014, reporting revenue of $249 million for the first quarter of 2014, up 5% from the same quarter in 2013.
Verisign reported net income of $94 million and diluted earnings per share (EPS) of $0.64 for the first quarter of 2014, compared to net income of $85 million and diluted EPS of $0.52 in the same quarter in 2013.
The operating margin was 56.1 percent for the first quarter of 2014 compared to 56.4 percent for the same quarter in 2013.
Verisign reported, on a non-GAAP basis, net income of $95 million and diluted EPS of $0.64 for the first quarter of 2014, compared to net income of $94 million and diluted EPS of $0.58 for the same quarter in 2013.
Shares are up $.80 after hours to back over $50 a share.
Verisign expects to complete in Q2 the intended repatriation of approximately $700M-$800M of cash held by foreign subsidiaries
Verisign ended the first quarter with cash, cash equivalents and marketable securities of $1.7 billion, flat as compared with year-end 2013.
Cash flow from operations was $142 million for the first quarter compared with $151 million for the same quarter in 2013.
Deferred revenues on March 31, 2014, totaled $886 million, an increase of $30 million from year-end 2013.
Capital expenditures were $11 million in the first quarter of 2014.
During the first quarter, Verisign repurchased 2.4 million shares of its common stock for $132 million. At March 31, 2014, $868 million remained available and authorized under the current share repurchase program.
Verisign Registry Services added 1.28 million net new names during the first quarter, ending with 128.5 million active domain names in the zone for .com and .net, which represents a 4% increase over the zone at the end of the first quarter in 2013.
In the first quarter, Verisign processed 8.6 million new domain name registrations for .com and .net as compared to 8.8 million for the same period in 2013.
The final .com and .net renewal rate for the fourth quarter of 2013 was 72.2% compared with 72.9 % for the same quarter in 2012.
Renewal rates are not fully measurable until 45 days after the end of the quarter.
Verisign ended the quarter with $1.7 Billion in cash and equivalents
According to Verisign.com, the operator of the .Com registry the number of .Com domain names just broke the 113 Million mark for the first time.
The official number at the last Verisign update was 113,002,815.
According to ntldstats.com/tld the number of new gTLD registrations are over 332,000…
Stock Analysis firm Trefis had some interesting comments on Verisign in a note entitled “Drop In Verisign Shares Highlights Risks Associated With Domain Business”
The note went on to say that the biggest risk to the Verisign business is growth in ccTLD domain names.
Trefis didn’t mention the new gTLD’s at all.
It would be one thing to mention new gTLD’s and then conclude that the wouldn’t impact Verisign market share of the global domain market, but for the company not to even mention new gTLD’s makes it look like Trefis doesn’t even know they exist.
Regarding the contract to run the .net and .com registry, all Trefis had to say was that “Losing the contract for either of these domain names come 2018 would mean a severe cut in the company’s top line”
The post did not mention ICANN or the impact that the US possibility giving up oversight might effect the contract the next time it comes up for renewal.
Here is the post:
How Will Losing The .com/.net Contract Impact VeriSign?
VeriSign is the sole registrar for the .com/.net domain names, and had a market share of approximately 46.7% in global top level domain name registrations in 2013. At the end of Q3FY13, VeriSign had a total of 126 million .com and .net domain names registered in the adjusted zone out of a total 265 million domain names registered globally.
Losing the contract for either of these domain names come 2018 would mean a severe cut in the company’s top line. You can take a look at the impact a loss in contract to another registry service provider such as Neustar on VeriSign’s stock by changing its share of all domain registrations worldwide.
“Currently, we believe the only threat to VeriSign’s market share in the global domain name registrations market is from country code top level domain names (ccTLDs). ccTLD registrations reached 119.5 million at the end of Q3FY13 and have been increasing at almost three times the growth rate in .com/.net domain names. “
“This rapid increase in ccTLD registrations, combined with restrictions on domain name pricing, have strained top line growth for VeriSign, which fell to 10.5% in 2013 from 13% in 2012. ”
“We expect VeriSign’s market share to decline gradually until the end of our review period as ccTLD registrations continue to grab potential .com/.net registrants.”"…