Editor in Chief
- Jul 27, 2011
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For any of our members who are investors in Apple stock, or who are simply interested in how well the company is doing, here's an intriguing story for today. Famous investor Carl Icahn has such high praise for Apple and its business right now, he publicly stated his belief that Apple's stock is greatly undervalued right now.
Icahn believes that Apple's stock is worth $200 per share, which is roughly twice its current $101 value. Additionally, Icahn believes in Apple's near-future so much, he is suggesting the company ramp up its stock buy-back program. This will have the double effect of having the company invest in itself and will further drive up the stock price.
“Given the persistently excessive liquidity of $133 billion net cash on Apple’s balance sheet, we ask you to present to the rest of the Board our request for the company to make a tender offer, which would meaningfully accelerate and increase the magnitude of share repurchases.
“We thank you for being receptive to us the last time we requested an increase in share repurchases, and we thank you in advance now for any influence you may choose to have communicating to the rest of the Board the degree to which a tender offer would have a positive impact on an EPS basis for all shareholders."
Icahn also shared he believes analysts are predicting Apple's projected earnings too conservatively. He believes Apple's revenue will move 25% and earnings will surge 44% to $9.61 a share next year, based upon massive sales of the iPhone and the success of several of Apple's products, including Apple Pay.
Here's a quote with more of the details why Icahn is so bullish on Apple stock right now,
He goes on to say earnings will rise a further 30% in each fiscal 2016 and 2017. Applying a price/earnings multiple of 19 to 2015 earnings and adding the net cash he arrives at a fair-value estimate of $203 for the stock. This would make Apple, which now has a market value just above $600 billion, the first $1 trillion company in history.
Apple from early 2013 through June had already bought back a whopping $51 billion in stock, with a plan for that to get up to $90 billion by the end of calendar 2015. Icahn doesn’t specify an amount of additional repurchases he’d like to see accomplished through the tender offer he’s proposing.
Icahn lavishes praise on Cook's reign: “To be totally clear, this letter is in no way intended as a criticism of you as CEO, nor is it intended to be critical of anything you or your team are doing from an operational perspective at Apple. Quite to the contrary, we could not be more supportive of you and your team, and of the excellent work being done at Apple, a company that continues to change the world through technological innovation.
“The intention of this letter is to communicate two things to you: (1) given the earnings growth we forecast for Apple, we continue to think that the market misunderstands and dramatically undervalues Apple and (2) the excess liquidity the company continues to hold on its balance sheet affords the company an amazing opportunity to take further advantage of this valuation disconnect by accelerating share repurchases.”
Source: Yahoo Finance