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VeriSign's (NASDAQ: VRSN) 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.
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.
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).