Two days after Apple set a new record for the highest market capitalization of any company, valuing it at more than $700B, billionaire investor Carl Icahn has suggested the true value of the company is close to double this, at $1.3T.
Icahn, who is one of the company’s ten biggest shareholders with stock worth around $6.5B, says that a realistic valuation of the company would be 20 times its earnings per share. Factoring in Apple’s cash reserves of $178B, that would give a share price of $216–for a total company value of $1.3T.
Icahn notes that while he has previously been criticized for over-optimistic valuations of AAPL, 31 analysts have “dramatically increased” their earnings-per-share estimates in the past fortnight.
We have gained further confidence in our thesis, increasing the forecasted EPS for FY 2015 in our model from $9.60 to $9.70, and now believe the market should value Apple at $216 per share. This is why we continue to own approximately 53 million shares worth $6.5 billion, and why we have not sold a single share.
Icahn has consistently urged Apple’s board to increase the pace of its stock buyback program, his last call coming at a time when the shares were trading at $100. At the time of writing, shares were trading at $124.88. Apple recently set another world record, announcing the highest ever quarterly profit of any company.
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I can only hope that he is right – and this is not the “Kiss of Death” for the dramatic stock increase!
I would feel better if the investor with this much stock was Warren Buffet and not Carl Icahn.
I think Carl knows what he is doing. The only problem is that everyone needs to sell before he does.
This is a great article about how Apple has essentially defied all the “experts” on how the tech world works and how Apple isn’t doing it right, etc….
http://qz.com/340899/apple-earnings-iphone-business-theories/
I’m an Apple investor but Icahn is over optimistic in my opinion. Apple has traded with a 20 P/E in forever and I don’t think it will this year (if it hasn’t by now what is the catalyst? We know the watch, Apple Pay, 6s, 6s+, etc… the are already factored in).
If Apple can get some how get to 16 dollars a share in earnings then it might work but I think that is out of the real of possibilities without some kind of a new must have gadget that transforms the planet (I don’t think a Watch or a TV is it).
I hope I’m wrong but this sounds like smoke blowing from Carl before he starts to trim his stake.
err… Apple hasn’t traded with a 20 P/E…
I’ve always considered Apple stock to be long term. Unlike other tech company stock where they start and just want to be bought out.
Apple stock is long term, as another posted mentioned here. There’s no point to speculate with the standard factors (i.e. P/E, etc.) when it comes to Apple.
how are they going to get all that cash into the US to pay for those buy backs? with most expansion occurring outside the US a lot of that cash isn’t going to be able to be repatriated unless there is new tax law passed