Legendary investor Warren Buffett made waves at this year’s annual Berkshire Hathaway (BRK.B) meeting when he announced that he would step down as CEO of the conglomerate at the end of the year. This sent shockwaves through the market, and may have overshadowed the key moves Berkshire made in the first quarter. 

Displeased by high equity valuations, not only has the “Oracle of Omaha” pumped up Berkshire’s cash levels to record highs near $348 billion, Buffett has also been trimming stakes in the companies he owns quite vigorously in the past few quarters. In fact, Berkshire has been a net seller of stocks for 10 consecutive quarters. 

This trend continued in Q1 2025 as well as Buffett continued to make his stock portfolio lighter. One such stock in which the soon-to-be ex-CEO of Berskhire Hathaway reduced his stake was Capital One Financial (COF).

About Capital One Financial

Capital One Financial is a diversified financial services company offering a broad spectrum of products and services to consumers, small businesses, and commercial clients.

The company commands a market cap of $75 billion while its stock is up about 6.6% on a YTD basis. Although the company offers a modest dividend yield of 1.26%, its payout ratio of just 12.9% leaves much room for growth.

Berkshire Hathaway sold 300,000 shares of the company in the first quarter, reducing his stake by about 4%. However, Buffett still holds a substantial 7.15 million shares of the company. 

Buffett had initially bought 9.92 million shares valued at around $954 million in Q1 2023, a period when the stock traded in the range of $82.49 and $129.49. Suffice to say then that Buffett is sitting on healthy profits from this investment.

And this is exactly the point. Buffett’s propelling of Berkshire’s cash pile to record levels and his continued reduction in stakes of his favorite companies hints at the fact that the celebrated investor believes the market is overvalued, and this is just mere profit-taking and not an indictment of Capital One’s fundamentals. Why do I say that? Let’s have a closer look.

Steady Financials With a Great Discover(y)

Capital One posted a stable set of numbers for the first quarter of 2025, underpinned by slow growth. While net revenues increased by 6% on a year-over-year basis to $10 billion, earnings rose by 10.2% in the same period to $3.45. Net interest income, a source of revenues for financial companies, went up by 7% to $8 billion and non-interest income increased by 4% in the same period to come in at about $2 billion.

Loans held for investment and interest-earning assets went up by 3% and 2% to $323.6 billion and $463.4 billion, respectively with deposits growing by an even sharper 5% in the same period to $367.5 billion.

Meanwhile, key metrics essential to monitor for a financial services company like Capital One also showed improvement. Net interest margin grew to 6.93% from 6.69% in the year-ago period. Common equity Tier 1 capital, a harbinger of stability for banks, inched up to 13.6% (vs 13.1% in Q1 2024).

Also, Capital One’s recent acquisition of Discover Financial marks a transformative move that positions the company as a formidable force in the consumer credit landscape, distinguished by its scale, efficiency, and market penetration. This merger brings together two well-established financial institutions, creating opportunities for significant operational synergies, enhanced use of data analytics, and meaningful cross-selling prospects. 

The integration immediately results in a uniquely structured, vertically integrated payments network that spans more than 70 million merchant locations across over 200 countries. This infrastructure allows Capital One to effectively rival the most dominant players in global payments and opens the door to capitalize on network-driven efficiencies. 

Taken together, Capital One’s bolstered position through this acquisition, combined with its solid deposit base, prudent credit reserves, and strong capital standing, forms a compelling foundation for sustained shareholder value creation over the long term.

Analyst Opinions on COF Stock 

Taking all of this into account, analysts have deemed Capital One stock a “Moderate Buy” with a mean target price of $214.95, which indicates upside potential of about 14% from current levels. Out of 21 analysts covering the stock, 14 have a “Strong Buy” rating, one has a “Moderate Buy” rating, and six have a “Hold” rating.