The stock of Berkshire Hathaway (BRK.B) has received a rare Sell rating.
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Analysts at boutique investment bank Keefe, Bruyette & Woods, known as KBW, downgraded Berkshire Hathaway’s Class B stock to a Sell-equivalent underperform rating, warning investors that Warren Buffett’s succession and a slew of business headwinds could weigh on the holding company’s future earnings and share performance.
KBW lowered its price target on Berkshire Hathaway’s more expensive Class A (BRK.A) shares to $700,000 from $740,000, implying 5% downside from current levels. “Beyond our ongoing concerns surrounding macro uncertainty and Berkshire’s historically unique succession risk, we think the shares will underperform as earnings challenges emerge and/or persist,” wrote the analysts in a note to clients.
Succession
Berkshire’s stock has largely been trading sideways since Warren Buffett, age 95, announced this spring that he will step down as CEO of the company at year’s end. However, Buffett, who has run Berkshire for 60 years, will remain chair of the company’s board of directors.
Not having Buffett directly involved in daily affairs is a blow to Berkshire Hathaway, argues KBW. Plus, the company’s core businesses that include auto insurer Geico and railroad Burlington Northern Santa Fe, are likely to face pressure in the year ahead as the U.S. economy and consumer spending slow.
BRK.B stock is up 7% on the year, trailing the 17% gain in the benchmark S&P 500 index.
Is BRK.B Stock a Buy?
Only a couple of analysts currently offer a rating and price target on Berkshire Hathaway’s more affordable Class B stock. So instead, we’ll look at the shares’ three-month performance. As one can see in the chart below, shares of BRK.B have risen 2.16% in the last 12 weeks.
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