KBW, a U.S. investment bank, downgraded Berkshire Hathaway, run by Warren Buffett, who is called the "Oracle of Omaha," cutting its rating to "sell" from "neutral."
According to CNBC in the United States on the 27th (local time), KBW changed its rating on Berkshire Hathaway Class A shares to sell and lowered its target price to $700,000 from $740,000. On the 24th, Berkshire Hathaway closed at $738,500.
Meyer Shields, a KBW analyst, said, "We think Berkshire shares will underperform as performance issues have emerged and persisted, beyond the uncertainty of ongoing macroeconomic concerns and unique succession-related risks considering Berkshire Hathaway's history."
KBW said Berkshire's core business areas are likely to face simultaneous pressure for the next several years due to the slowdown in auto insurance revenue, weakening growth in the rail freight market, and reduced tax incentives for clean energy. Berkshire counts auto insurer Geico and major freight railroad BNSF among its key subsidiaries.
After Chairman Buffett, age 95, released his retirement plan at the annual shareholders meeting in May, Berkshire Hathaway's share price has remained sluggish.
As a rally in high-tech stocks such as artificial intelligence (AI) has continued recently, Berkshire Hathaway's heavy allocation to traditional industries such as finance and energy is also cited as a factor behind the weak share price.
Berkshire Hathaway plans for Vice Chairman Greg Abel, who currently oversees noninsurance operations, to take over management from Chairman Buffett starting in January next year.