Registrations surge, is Verisign a good buy? — As .Com

Domain name registrations are outpacing Verisign’s guidance.

There was a rather spirited conversation over at DomainSherpa today regarding the landrush on short domain names.

Is it a bubble? Maybe so. But guests Frank Schilling, Andrew Rosener and Shane Cultra discussed one way you can play in this boom without ever buying a numeric or four character domain name: buy Verisign stock.

The thinking is that most analysts and people following the stock market aren’t keeping up-to-date with .com and .net registrations this quarter. They will be pleasantly surprised when Verisign (NASDAQ: VRSN) releases its Q4 numbers.

Here are some arguments for and against this position.

Yes, you ought to buy some Verisign stock:

• Verisign forecasted growth in the domain name base in Q4 of 1.1 to 1.6 million names for .com and .net combined. If the quarter ended today, the domain base would be up a whopping 3.85 million domain names.
• Few people know this since they don’t keep a daily eye on .com/.net registrations, and they don’t know what’s going on in the Chinese market. It’s a buying opportunity.

No, you shouldn’t buy Verisign stock:

• The numeric and short registration binge is almost over. They’re running out of domains to register.
• This is just a one-quarter blip in registrations, and numbers will return to normal next month.
• The quarter isn’t over, and the .com base could fall between now and the end of the year.
• Analysts check the Verisign domain base statistics page daily, and they’re adjusting their forecasts throughout the quarter.
• Verisign stock is by now up 22% since October.

The number of bullet points is in no way indicative of my opinion.

One way to play this would be to buy call options on VRSN stock. 95.0 call options expiring March 18 recently traded for $1.40.

I do not own any stock in Verisign (unless it’s in a mutual fund I own), nor do I have any options.