Warren Buffett's Berkshire Hathaway Faces Apple Risk, Bearish Momentum Ahead Of Q1 Earnings

Zinger Key Points
  • Berkshire Hathaway investors are concerned about its reliance on Apple, which accounts for over 50% of its investment portfolio.
  • Technically, Berkshire Hathaway's stock is displaying bearish signals, with key moving averages breached and selling pressure evident.

Berkshire Hathaway Inc BRK BRK, the investment firm led by Warren Buffett, will be reporting first-quarter earnings on Saturday, May 4. Wall Street expects $4.57 in EPS and $80.41 billion in revenues as the company reports before market hours.

The stock is up 21% over the past year, 12.07% up year-to-date.

Berkshire Hathaway’s ‘Apple Risk’

Berkshire Hathaway investors are increasingly questioning its growth prospects.

At a forward P/E of 20.56, its valuation as a large tech company doesn’t appear justified by its portfolio composition to many, particularly its heavy investment in Apple Inc AAPL.

The concentration risk of Apple, accounting for 50.19% of its total investment portfolio is seen as a potential risk — the ‘Apple risk’.

Related: Wall Street Analyst Warns Apple Stock Could Get ‘Killed’ And ‘Would Not Be Surprised If Buffett Is Selling Right Now’

Berkshire’s growth mainly comes from its insurance segment, while other areas show limited growth. With future growth prospects uncertain, Berkshire’s valuation appears inflated and above historical norms.

Let’s look at what the charts indicate for Berkshire Hathaway stock, and how the stock currently maps against Wall Street estimates.

Charts Indicate Bearish Momentum Prevailing Ahead Of Q1 Earnings

Technically, Berkshire Hathaway’s stock is showing bearish signals. It has fallen below key moving averages, including the 8, 20, and 50-day SMAs. The stock is experiencing selling pressure.

Chart: Benzinga Pro

Meanwhile, the oscillators too, are adding to the bearish sentiment.

Chart: Benzinga Pro

The stock is currently trading in the lower of the Bollinger Bands. This indicates that the stock price is relatively low compared to its recent price range. Perhaps the stock is oversold and may be due for a potential rebound or reversal.

However, the Moving Average Convergence Divergence (MACD) indicator is at -2.41, even below the signal line at -1.67. It typically indicates a bearish signal. This suggests that the stock’s momentum is currently negative and that there may be further downside potential in the short term. Traders often interpret this as an indication to stay cautious until the momentum shifts.

The RSI for Berkshire Hathaway stock is in the Neutral territory at 43.44, flirting occasionally with the oversold level below 30.

Overall, the technical setup for Berkshire Hathaway stock paints a very bearish picture.

Also Read: Can Warren Buffett’s Successors Maintain Berkshire Hathaway’s Momentum?

Berkshire Hathaway Analysts Are Still Bullish

Ratings & Consensus Estimates: The consensus analyst rating on Berkshire Hathaway Class B stock stands at a Buy currently with an average price target of $481 a share. Four of the six analysts who reviewed and rated the stock in May have a Buy/Strong Buy recommendation on the stock.

BRK Price Action: Berkshire Hathaway stock was trading at $399.74 at the time of publication.

Read Next: Warren Buffett Warns Cash Goes Down In Value – Having A Surplus Makes Him ‘Unhappy’

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