Apple, the first company to close at $1 trillion, should be trading today at $216 per share, and will bring revenue of $9.70 per share, activist investor Carl Icahn’s prediction went.
He said he is bullish on Apple, collected 53 million shares worth $6.5 billion and has sold not a single share.
Icahn’s prediction of Apple was motivated by Tim Cook’s words on Tuesday at the Goldman Sachs conference. Also, Apple reached milestone yesterday for being the first American company to reach $700 billion valuation.
“By and large, my view is, for cash that we don’t need we want to give it back. It may come across that we are, but we’re not hoarders,” Cook said during the conference.
In an open letter penned by Icahn, he said he is pleased to hear those words from Cook. He said Cook’s position with respect to excess cash is great news for shareholders.
Shareholders now “look forward to the capital return program update in April, anticipating it will include a large increase to share repurchases.” He wrote this in a letter published via Shareholder’s Square Table.
In his letter, Icahn provided a thorough analysis of Apple’s tax rates and accounting rules the company follows with respect to its international revenues.
Icahn thereby increased his FY 2015 EPS forecast from $9.60 to 9.70 and highlighted that Apple stock should be trading at $216 per share today. He argued that the market is undervaluing Apple.
“The market is somehow missing a very basic principle of valuation: when a company’s future earnings are expected to grow at a much faster rate than that of the S7P 500, the market should value that company at a higher P/E multiple,” he wrote.
Icahn continued to argue that Apple should trade at P/E of at least 20 times, saying that at the rate the company is introducing products for FY 2016 or 2017 “20x multiple is conservative.”
Apple will remain unstoppable in its innovation and domination across platforms, be it services, software and hardware, Icahn wrote. He said shareholders are all excited about what the Apple Watch brings in April.
Icahn ended his letter in a high note.
“Apple will continue dominating the premium smartphone market by continuing to take premium market share from Google’s Android operating system while at the same time maintaining or growing average selling prices and gross margins.”