Apple share prices too low, says Icahn

CARLICAHN

The world’s largest company is set to reshape the payments industry for good – but Apple is still misunderstood and undervalued, says billionaire investor Carl Icahn.

In a letter to Apple CEO Tim Cook, Icahn recommended that the company increase its share buy-back programme in the face of an ambitious set of forecasts for its products. The investor said that the tech giant should be trading at $203 per share, nearly double their current price.

Icahn committed to not tendering any of his own shares in the company – having bought a stake in October and increased it in January – if Cook convinced the Apple board to embark on a tender offer for its own shares that would “meaningfully accelerate and increase the magnitude of share repurchases.”

 Apple’s strong balance sheet, with net cash of $133bn, “affords the company an amazing opportunity to take further advantage of this valuation disconnect by accelerating share repurchases,” he said.

 Icahn believes that the iPhone 6 will take a majority market share, being seen as  a better value and better quality product than its direct competitors, the Galaxy S5 and Note 4 now that it offers a larger screen. The availability of cheaper phones will not reduce sales.

Beyond that, Icahn cited the loyalty of Apple users as a main reason for growth – as it adds new products, the Apple obsessed will continue to buy and upgrade. The new product that will cause the biggest stir, in the investor’s opinion, is the possibility of an UltraHD television set release within two years.

“Television represents a large opportunity for Apple, one that reaches far beyond ‘the hobby’ that Apple TV currently represents,” he wrote.

Icahn forecasts Apple’s growth at 44 per cent for the next year, then 30 per cent for the next two, as the addition of Apple Pay to its raft of services starts to take effect. Apple might be the single company that succeeds in making mobile payments take off, he adds.

“Apple, dominant in the premium market, has customers who spend more on average than its peers, and it is therefore unusually well positioned to succeed with Apple Pay where others could not.”

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