Icahn Capital LP’s owner and billionaire investor Carl Icahn wrote a letter to Apple Inc (NASDAQ:AAPL)’s CEO saying that the shares of the company are undervalued and are selling at half of their justified price.
In his letter to Tim Cook, Apple CEO, Icahn appreciated the management for their recent product success and increasing gross margins but at the same time, he added that the shares of the company are selling at half price. Icahn called Tim Cook “the ideal CEO of Apple” and said that Apple is one of the best tech companies of the last few decades. He further stated that depending upon the earning projects, Apple Inc (NASDAQ:AAPL)’s shares should be worth $203. He said that there is “a massive undervaluation” and it “will not last for long.”
Icahn suggested Apple Inc (NASDAQ:AAPL) to buy back its shares by saying that Cook should “meaningfully accelerate and increase the magnitude of share repurchases.” Apple responded positively to the letter stating,
“We always appreciate hearing from our shareholders. Since 2013 we’ve been aggressively executing the largest capital return program in corporate history. As we’ve said before, we will review the program annually and take into account the input from all of our shareholders.”
Carl Icahn owns 53 million shares of the company with market value of $4.9 billion and higher. According to his letter, Apple should expect growth of 44%, 30%, and 30% over the next 3 fiscal years respectively. At the same time, the revenue is likely to grow by 25%, 21% and 21% respectively. Both Apple Watch and Apple iOS Ultra HD TV will provide the necessary momentum for growth.
Icahn further added, “It is truly a watershed moment, with Apple poised to take market share from Google (Android) in the premium device market as iPhone 6 becomes Apple’s flagship device among a growing collection of products and services that work together to form an increasingly dominant mobile ecosystem.”
Colin Gillis, BGC Partners, said,
“Icahn has laid it all out, and it would be easy to see how it works,” but he further added that the technical landscape might change quickly and some of the assumptions of Icahn may not hold true in the longer run. For an instance, Icahn’s forecast of Apple selling 72.5 million Apple Watches in 2017 sounds reckless and he further added, “Apple remains primarily the iPhone company, and they are bucking the trend by raising prices as the average sale price drops.”
This article has been written by Prakash Pandey.