VeriSign's (VRSN 0.33%) stock rallied more than 30% over the past 12 months, even as fears of rising tariffs, sticky inflation, and elevated interest rates rattled the markets. During that same period, the S&P 500 only advanced 6%. Let's see why this slow but steady stock beat the market -- and if it will head even higher in a year.
What does VeriSign do?
VeriSign operates the authoritative domain name registries for two of the internet's most popular top-level domains: .com and .net. It's also the primary subcontractor for the .edu and .jobs domains. It sells its domain names to registrars, like GoDaddy (NYSE: GDDY) and Network Solutions, which then sell them to public customers.
From 2014 to 2024, VeriSign's year-end .com and .net registrations grew from 130.6 million to 169 million. That slow but steady expansion indicates that domain names will remain valuable, even as more mobile apps replace traditional websites.
Image source: Getty Images.
As long as companies, organizations, and other customers need to register and renew those websites, VeriSign will keep growing. From 2014 to 2024, its revenue rose at a compound annual growth rate (CAGR) of 4%, its earnings per share (EPS) increased at a CAGR of 12%, and it bought back nearly a fifth of its shares. Its renewal rate has held steady in the low 70s over the past decade.
Those stable growth rates, along with its evergreen business model, drew in a lot of investors. Warren Buffett's Berkshire Hathaway bought its first shares of VeriSign in 2012, and it now owns a $3.3 billion stake in the company. VeriSign was also one of the few stocks that Berkshire accumulated over the past year as it sold many of its top holdings to raise its cash to record levels.
Moreover, VeriSign's insiders bought nearly 11 times as many shares as they bought over the past 12 months. That warmer investor and insider sentiment suggests it's still undervalued.
NASDAQ: VRSN
Key Data Points
Dissipating headwinds and incoming tailwinds
VeriSign has a wide moat and plenty of pricing power, but some politicians and advocacy groups have repeatedly called for an antitrust investigation of the company.
These critics claim it's unfair for a single company to control the internet's most popular domains, and they've even pressed the Department of Justice (DOJ) to block the renewal of its two long-term .com agreements with the U.S. government -- a Registry Agreement with the Internet Corporation for Assigned Names and Numbers (ICANN) and a Cooperative Agreement with the National Telecommunications and Information Administration (NTIA).
But despite those persistent protests, those two crucial agreements were still renewed for another six years last August. As those regulatory headwinds dissipated, VeriSign's stock bounced back. However, VeriSign attracted more investors this year as fears of higher tariffs drove people to seek out "tariff-proof" stocks. VeriSign fits that profile, because it only provides digital services and doesn't import or export any products.
From 2024 to 2027, analysts expect VeriSign's revenue and EPS to grow at CAGRs of 5% and 8%, respectively. At $250 a share, it doesn't seem undervalued at 29 times this year's earnings. But it also isn't terribly expensive -- and its resistance to the tariffs and other macro headwinds could justify that higher valuation in this choppy market.
Where will VeriSign's stock be in a year?
Assuming VeriSign matches analysts' estimates and still trades at 29 times forward earnings, its stock could rise 16% to about $290 by the first quarter of 2026. That gain might not impress growth-oriented investors, but it clearly has a shot at beating the S&P 500 (which has averaged an annual return of about 10% since inception) over the next 12 months.
