VeriSign(NASDAQ: VRSN) isn't considered a high-growth stock. But over the past three years, the domain registry operator's shares rallied 66% as the S&P 500 advanced 37%. Let's see why this oft-overlooked stock beat the market -- and where it might head over the next three years.
A boring but evergreen business
VeriSign operates the authoritative domain name registries for the internet's two most popular top-level domains: .com and .net. It's also the main subcontractor for the .edu and .jobs domains.
VeriSign sells its domain names to registrars, like GoDaddy and Network Solutions, which are responsible for selling them to website operators. So as long as businesses, organizations, governments, and individuals keep registering and renewing their websites under those popular domains, VeriSign's revenue and profits will continue to rise.
Image source: Getty Images.
VeriSign's simple business model seems evergreen, but it might face two long-term challenges. First, mobile apps and social networks might reduce the importance of dedicated websites with easy-to-remember addresses. Second, antitrust regulators could drive it to loosen its grip on its top-level domains. But those potential challenges aren't sinking VeriSign's business yet.
From 2014 to 2024, VeriSign's year-end .com and .net registrations rose from 130.6 million to 169 million as its renewal rate stayed in the low 70s. In the first quarter of 2025, its .com and .net registrations increased to 169.8 million as its renewal rate rose 80 basis points year over year to 74%. Therefore, website domains are still relevant in the age of mobile apps and social networks.
Last August, VeriSign renewed its two .com agreements with the U.S. government for another six years -- even though some politicians and advocacy groups adamantly opposed those deals and demanded an antitrust probe into its control of the .com and .net domains. Those renewals should insulate VeriSign from antitrust headwinds for the foreseeable future.
What happened over the past three years?
From 2021 to 2024, VeriSign's revenue and earnings per share (EPS) both increased at a compound annual growth rate (CAGR) of 5%. It also bought back 13% of its shares over the past three years. It maintained that stable growth rate even as inflation and rising interest rates rattled the global markets.
That wasn't surprising, since businesses generally won't stop registering and renewing their domains just to save a few dollars during an economic downturn. It also became a popular safe haven stock this year, since its business probably won't be disrupted by the Trump administration's tariffs, escalating trade wars, and other macro challenges.
That might be why Berkshire Hathaway accumulated more shares of VeriSign over the past year -- even as it sold a lot of its other top stocks to raise fresh cash and buy more short-term Treasuries. VeriSign's insiders also bought nearly 11 times as many shares as they bought over the past 12 months. That warmer insider sentiment suggests it has a lot more room to run.
What will happen over the next three years?
From 2024 to 2027, analysts expect VeriSign's revenue and EPS to grow at CAGRs of 5% and 10%, respectively. Assuming it matches those estimates, grows its EPS by another 10% in 2028, and still trades at 33 times forward earnings, its stock price could rise 34% to about $386 over the next three years.
However, VeriSign's valuations are looking a bit frothy relative to its growth potential -- which suggests too many investors are still scooping it up as a "tariff-proof" stock. Assuming it grows at the same aforementioned rate and trades at a more reasonable 20 times forward earnings by 2028, its stock price might actually decline 18% to $234.
So while VeriSign's business model seems rock-solid, a bit too much growth and safety might already be baked into its premium valuations. It might keep commanding a higher valuation as long as investors are nervous about tariffs and trade wars, but it could quickly lose its luster if any of those headwinds dissipate. So while VeriSign had a great run and could be a sound long-term play, I believe its stock will either trade sideways or slip lower over the next three years, instead of staying ahead of the S&P 500.
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Leo Sun has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and VeriSign. The Motley Fool recommends GoDaddy. The Motley Fool has a disclosure policy.
