Verisign, Inc. (NASDAQ:VRSN) saw Point State Capital increase its stake by over 150% per a 13G filing with the SEC last week. Point State now owns over 4.6 million shares, or about 3% of Verisign’s outstanding shares. This is a slight pivot from the third quarter when Point State sold off 33% of its Verisign shares. Sean Cullinan founded Point State in 2010 with six former Duquesne Capital portfolio managers, and focuses on a global macro strategy. Verisign is also one of billionaire Julian Robertson’s favorite picks (check out Julian Robertson’s new favorites).
Verisign is also one of billionaire Stephen Mandel’s top picks, and was a new position for him in 3Q, good for around 2.8% of his 13F. Mandel is one of Julian Robertson’s “tiger cubs” that left Tiger Management in 1997 to found Lone Pine Capital.
Verisign had seen uncertainty in its shares over the past few months as the Department of Commerce contemplated the renewal of its contract to oversee .com registries. The DOC recently approved Verisign’s renewal, with a big caveat – the Internet service company cannot raise prices. This put the stock down over 10% during the last month and it now trades around $36 a share. Verisign will keep its current pricing of $7.85 per domain for the duration of its six-year contract, but without price hikes – four price increases by up to 7% – that its previous contract allowed.
The Internet company remains the leading provider of web registry services for .com and .net domains, with over 105 million .com domains and 5 million .net domains in its portfolio. Verisign is currently able to bring in $7.95 per year per domain name, allowing for solid reoccurring cash generation, and it expects revenues to be up by 10% in both 2012 and 2013. The company’s long-term growth rate following the contract renewal drops from a previous 20% CAGR to a revised 16%.
Verisign has no perfect competitors, but other key service-based tech companies include Yandex NV (NASDAQ:YNDX), Red Hat, Inc. (NYSE:RHT), Akamai Technologies, Inc. (NASDAQ:AKAM) and Equinix Inc (NASDAQ:EQIX). Yandex recently posted guidance that current FY revenues should be up 40% year over year. The Russian search company owns around 60% of its respective market, while trading above top peer Baidu at 30x earnings, compared to Baidu’s 20x multiple. Despite its high P/E, Yandex’s forward P/E comes in at 20x and its robust 30% expected EPS growth rate brings its PEG below 1.0.