CLSA Rates VeriSign (NASDAQ: VRSN) As Buy

CLSA noted modest improvements in growth as it reiterated its Buy rating for VeriSign (NASDAQ: VRSN) and set a price target of $29. They summarize their findings as follows:

“Our analysis of the Domain Name Zone file indicates net 1Q10 additions of 2.4million .COM and .NET names (+2.5%QoQ), ahead of our 1.98 million(+2.1%) forecast and the 2.1 million in 1Q09 (+2.2%QoQ). This equates to an annualized pace of 9.9%, ahead of our forecast of 7.0%. While QoQ growth is below the mid-to-high single digits from 2004-2008, the modest improvement over 1Q09 is nonetheless welcome. With price increases slated for 1 July, the revenue impact will be gradual over coming quarters, but any acceleration in deferred revenues should reflect improving fundamentals. We continue to rate VeriSign shares BUY with a $29 price target.”

An analyst for CLSA commented on developments in Global Top Level Domains (gTLDs), saying, “As ICANN re-asserted prohibitions on registrars operating gTLDs, this favors VeriSign as a potential provider of back-end registry services, which we still view as a longer-term incremental growth opportunity.”

The analyst also expressed optimism regarding VeriSign’s Trust Seal by stating that “While authentication is a basic function of SSL Certificates, malware scanning clearly differentiates the Trust Seal. Forecasts of $5m for 2010 appear reasonable, while cross-synergies could provide upside.”