UBS lowers Berkshire Hathaway stock price target citing EPS forecast

UBS analysts lowered their price target for Berkshire Hathaway (BRKa) to $887,099 from $909,218, and for BRK.B to $591 from $606, citing modestly reduced EPS estimates due to lower investment income forecasts and the exclusion of share repurchases in their valuation model. Despite the price target reduction, UBS maintains a Buy rating, highlighting Berkshire's strong $347 billion cash position, defensive business mix, manageable tariff exposure, and the potential for GEICO to regain market share.

Analysis

UBS analysts have revised their price target for Berkshire Hathaway Class A (BRK.A) shares downwards to $887,099 from $909,218, and for Class B (BRK.B) shares to $591 from $606. This adjustment stems from modestly reduced earnings per share (EPS) estimates, primarily driven by a lower forecast for investment income and the exclusion of share repurchases for the remainder of 2025 and 2026 in their valuation model, a decision influenced by current share trading levels relative to intrinsic value. Despite this price target reduction, UBS maintains a "Buy" rating on the stock. The analysts underscore Berkshire Hathaway's significant financial strength, highlighted by its $347 billion in cash and short-term investments. Furthermore, they point to the company's defensive business mix and manageable tariff exposure as attractive qualities in the current uncertain macroeconomic climate. A key positive catalyst identified is the potential for GEICO to regain market share after several years of losses, which is anticipated to bolster Berkshire's insurance earnings and float. The overall sentiment from UBS remains optimistic, focusing on these fundamental strengths even as they incorporate more conservative investment income projections and revised assumptions on capital return strategies.

Key Decisions for Investors

• Investors should note UBS's continued 'Buy' rating on Berkshire Hathaway, underpinned by its substantial $347 billion cash position and defensive business characteristics, despite the modestly reduced price targets.
• Consider the potential for GEICO's market share recovery to positively impact future insurance earnings and float, a key growth driver highlighted by UBS analysts.
• Monitor developments in Berkshire Hathaway's investment income and its approach to share repurchases, as changes in these areas primarily drove the revised valuation, and also be aware that InvestingPro's AI analysis, mentioned in the article, did not rank BRKa at the top for undervaluation.