How High Will Berkshire Stock Go?

Berkshire Hathaway (NYSE:BRK.B) is considered among the best-performing investments in modern history. Berkshire’s stock appreciation over the years has created at least seven other billionaires and many more millionaires.

With the company now too mature to produce the enormous gains it did in its early years, though, potential investors must ask what the future holds if the biggest percentage gains are in the rearview mirror. And in light of the recent run-up, how much more fuel is left in the Berkshire tank to power higher prices?

How Is Berkshire Hathaway Performing?

In terms of revenue, Berkshire Hathaway is continuing to report steady, sustained growth that doesn’t appear to be in any danger of ending soon.

Over the last 10 years, the company has experienced just five quarters of revenue contraction. With nearly $350 billion in trailing 12-month revenues as of the most recent reporting, the Berkshire conglomerate has both scale and momentum on its side. Indeed, Buffett has commented that it’s the largest company in the United States by revenue.

Due to Berkshire’s large holdings in publicly traded stocks, the company’s reported earnings per share can vary widely based on the undulations of the stock market. Recent years, however, have been quite good to the company’s portfolio. Trailing 12-month net income stands at $76.7 billion, and Berkshire’s net margin over that period has been a healthy 22.0%.

Berkshire’s total assets also rose significantly in 2023. While the company hasn’t reported Q4 earnings yet, the Q3 earnings report detailed an increase of about 7.5% in the first nine months of 2023. This included a boost in the value of Berkshire’s stock portfolio from $308.8 billion to $318.6 billion.

Thanks to a massive stake in Apple, Berkshire’s portfolio was able to beat the broader market for the year in spite of lackluster performance among other top holdings.

Is Berkshire Undervalued?

While companies buying back their shares to satisfy investors and supporting stock prices is nothing new, Berkshire Hathaway is in the unique position of being headed by the most successful value investor in history. As a result, Warren Buffett’s personal estimations of his own company’s value carry a great deal of weight.

And, looking at share buyback activity, Buffett clearly believes that Berkshire is undervalued. Berkshire has spent billions of dollars on buybacks, indicating that Buffett believes repurchasing shares to be an effective use of cash in lieu of other investment opportunities.

This view is increasingly shared by Wall Street analysts. The target price for BRK.B shares is around $421, roughly 9.5% above the most recent price.

At 21x forward earnings, Berkshire is priced closely in line with the S&P 500 average. Unlike many other leading companies in the index, however, Berkshire has proven its ability to generate stable, solid returns for investors in practically all market conditions over many decades.

It’s also worth noting that Berkshire Hathaway carries virtually no debt, a fact which is highly unique for a financial company of its size.

This not only completely insulates it from interest rate expense pressures but also gives it the ability to take full advantage of higher interest rates by earning more on its cash. At current rates, the company is bringing in over $6 billion annually in interest from its treasury holdings.

How High Could Berkshire Hathaway Go?

According to analysts, Berkshire Hathaway B-shares could rise as high as $417.50 per share while A-shares could climb to $685,438 per share.

On a long-term basis, Berkshire’s future value will ultimately be determined by its ability to productively invest its massive cash reserves.

With over $157 billion in cash and treasuries, Berkshire is able to quickly make massive investments whenever attractive opportunities present themselves. While Buffett has found few such deals at a scale that make sense for Berkshire recently, the company remains in an exceptional position to take advantage of future market volatility.

It’s also worth considering the fact that Berkshire’s long-term prospects will be the result of both Buffett’s decades of guidance and the efforts of his eventual successors.

At 93, Buffett is rapidly nearing the end of his leadership of the company. His longtime friend, partner and co-chairman, Charlie Munger, passed away last year at the age of 99. However, Berkshire has a worthy successor in Greg Abel and a company culture that will likely keep it working on the investment principles refined by Buffett over many decades.

Although there’s no telling where BRK.B shares could be 20, 30 or 40 years from now, it’s possible to get a rough idea of the 10-year horizon.

By some forecasts, shares of Berkshire could trade as high as $900 by 2034. Even assuming a relatively low annual return of 8% annually, the stock would trade for over $800 in 10 years.

Given that earnings are expected to grow by over 13% in the coming year alone, it’s far from difficult to imagine Berkshire sustaining high single-digit growth rates over the coming decade.

It’s also possible that Berkshire will eventually become a very attractive dividend stock. While Buffett has historically resisted dividends on the insistence that the company’s cash is better off being reinvested, the sheer size of the cash stockpile calls into question how much longer this will be the case. Buffett has acknowledged that Berkshire may pay a dividend at some point, though his time frame for that eventuality is firmly beyond his own lifetime.

Continued buybacks could also support gradually higher share prices as remaining shareholder see their stakes concentrate. Between Q3 2020 and Q3 2023 alone, the number of outstanding BRK.B shares dropped from 2.38 billion to 2.17 billion. Assuming the company continues to view its own stock as undervalued or at least fairly priced, it’s quite likely that this trend will continue.

In the end, Berkshire Hathaway is still growing at a decent pace for a company of its size and enjoys unique advantages of both scale and know-how when it comes to investing.

Barring unexpected market disruptions or a sudden reversal of fortunes for the time-tested company, it seems likely that BRK.B shares could trade for $800-900 within the decade and move toward $1,000 shortly thereafter.

The company has always been considered the ultimate buy-and-hold investment, though, and it’s very probable that the company will continue generating value for its shareholders for many decades to come.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.