UBS sees Berkshire shares rising another 17% in 2025

Berkshire Hathaway shares should be a solid investment whether the economy flourishes or deteriorates in 2025, according to UBS, which projected a nearly 17% gain for the stock. Analyst Brian Meredith at the Wall Street investment bank believes the Warren Buffett conglomerate is poised to benefit from economic growth because of its cyclical businesses, including the BNSF Railway and manufacturing interests. But if the economy worsens, the stock could serve as a hedge due to the defensive nature of its huge insurance empire and Berkshire’s unmatched balance sheet boasting hundreds of billions in cash, he said. “Many of its Manufacturing, Services and Retail businesses, as well as BNSF, are economically sensitive and should perform well in a good economy,” Meredith wrote in a note to clients. “On the other hand, if the economy deteriorates and/or the market corrects, BRK’s Insurance businesses are defensive, and its substantial cash position gives BRK a lot of firepower for potential accretive acquisitions and share buyback,” he said. BRK.A 1Y mountain Berkshire Hathaway Class A shares in past year. The analyst hiked his 12-month price target on Berkshire Class B shares to $536 from $531, implying almost 17% upside from Thursday’s close of $459.83. The shares outperformed the S & P 500 in 2024, scoring a 25.5% gain, its best year since 2021. The strong performance came even as the 94-year-old “Oracle of Omaha” stopped buying back Berkshire stock as shares grew ever more expensive. Instead, the conglomerate relied on solid operating earnings this past year, supported by strong investment income and underwriting earnings at auto insurer Geico. UBS believes Geico, Berkshire’s insurance crown jewel, should see solid growth in 2025 as it adds to the number of policies outstanding following a slowdown. “2025 should be the year where GEICO pivots to growth after shrinking policy count for the last several years,” Meredith said. “With rates adequate in most states and the system upgrade almost complete, we are beginning to see GEICO increase ad spend and file for rate decreases in some states.” The Wall Street bank said it’s unlikely Berkshire will resume buybacks in a significant way given the stock’s elevated valuation. The shares are currently trading at a 1% premium to the conglomerate’s intrinsic value, UBS estimated. When Berkshire bought back a record amount of stock in 2020 and 2021, the stock was selling at a more than 20% discount to its intrinsic value, UBS said.