Shares of Berkshire Are Expected to Rise Another 17% in 2025 as Ubs Predicts an Uncertain Economy

UBS analysts project that Berkshire Hathaway shares could deliver strong returns in 2025, regardless of whether the economy thrives or falters. According to Brian Meredith, an analyst at the Wall Street investment bank, the stock could climb nearly 17%, offering stability and growth opportunities in both favorable and adverse economic conditions.

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Meredith highlights that Berkshire Hathaway, led by Warren Buffett, is uniquely positioned to benefit from economic growth due to its cyclical businesses, such as BNSF Railway and various manufacturing ventures. However, in a weaker economy, the company’s extensive insurance operations and robust balance sheet provide a defensive cushion. The conglomerate’s balance sheet, which holds hundreds of billions of dollars in cash, also equips it with the flexibility to pursue lucrative acquisitions or implement share buybacks during market downturns.

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“Many of its Manufacturing, Services, and Retail businesses, as well as BNSF, are tied to economic cycles and should perform strongly in a growing economy,” Meredith explained in a note to clients. “On the other hand, if the economy slows or the market undergoes a correction, Berkshire’s insurance businesses act as a defensive buffer, while its substantial cash reserves offer firepower for accretive acquisitions and share repurchases.”

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The analyst raised his 12-month price target for Berkshire’s Class B shares from $531 to $536, suggesting an upside potential of nearly 17% from Thursday’s closing price of $459.83.

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Berkshire Hathaway shares delivered a stellar performance in 2024, gaining 25.5%—the best annual return since 2021—significantly outpacing the broader S&P 500. Despite the impressive rally, the 94-year-old Buffett refrained from buying back Berkshire stock as valuations became increasingly expensive. Instead, the company relied on robust operating earnings, driven by higher investment income and strong underwriting results from Geico, its auto insurance subsidiary.

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Meredith expects Geico to be a key growth driver for Berkshire in 2025, particularly as it rebounds from a period of shrinking policy counts. According to UBS, Geico is poised to expand its policy base after several years of contraction.

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“2025 should mark a turning point for Geico as it shifts back to growth mode after several years of declining policy counts,” Meredith noted. “With rate levels now adequate in most states and its system upgrade nearing completion, Geico is increasing its advertising spend and filing for rate reductions in certain regions.”

These efforts are expected to enhance Geico’s competitiveness and profitability, contributing to Berkshire’s overall earnings growth in the year ahead.

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While Berkshire has historically engaged in substantial stock buybacks, UBS believes the likelihood of a significant resumption in 2025 is slim due to the stock’s current valuation. Meredith estimates that Berkshire shares are trading at a 1% premium to the company’s intrinsic value, making buybacks less attractive compared to past years.

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During 2020 and 2021, Berkshire repurchased a record amount of stock when shares were trading at more than a 20% discount to intrinsic value. With the current valuation relatively high, the company is expected to prioritize other strategies, such as reinvesting in its businesses and exploring acquisition opportunities.

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UBS’s outlook underscores Berkshire Hathaway’s unique ability to adapt to diverse market conditions. Its cyclical businesses, including BNSF Railway and manufacturing operations, position it to thrive in periods of economic expansion. Meanwhile, the company’s insurance empire and substantial cash reserves provide a defensive hedge against economic headwinds or market corrections.

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Meredith’s analysis also highlights the strength of Berkshire’s insurance segment, particularly Geico, as a growth engine for 2025. With improvements in operational efficiency and a renewed focus on expansion, Geico is expected to play a pivotal role in driving the conglomerate’s financial performance.

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In addition, Berkshire’s conservative approach to share buybacks reflects its disciplined capital allocation strategy, ensuring that resources are deployed in a manner that maximizes shareholder value. The company’s ability to maintain its financial flexibility while delivering consistent returns makes it a compelling choice for investors seeking stability and growth in an uncertain economic environment.

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Berkshire Hathaway’s diversified business model, strong balance sheet, and strategic focus position it as a reliable investment option for 2025. Whether the economy grows or contracts, the company’s mix of cyclical and defensive assets ensures it can navigate market challenges while capitalizing on opportunities. With Geico poised for a turnaround and robust cash reserves providing ample flexibility, Berkshire Hathaway remains an attractive choice for investors looking to balance risk and reward in their portfolios.

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