Carl Icahn calls Apple a 'no brainer' investment as his stake grows to over $3B

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  • Reply 81 of 85
    sog35 wrote: »
    cause its a reasonable amount considering that Apple has $170B in the bank and generates $50B each year

    So in fact, what Icahn wants is not a small thing, but a substantial change. By saying "All Icahn wants" implies that his proposal is modest and won't make much difference, when this isn't the case.
  • Reply 82 of 85
    He is simply trying to manipulate the market to suit himself. I thought there were rules against that.

    Nothing to see here apart from a greedy self interested capitalist
  • Reply 83 of 85
    Quote:

    Originally Posted by Marvin View Post





    You need to have an idea of what it is worth to make the assessment that it's undervalued so what should Apple's market cap be and why? The value comes from traders looking for gains. What's in it for a trader to buy Apple stock at $700? If there's no incentive for someone to buy at $700, it's not going to reach $700. If they buy back shares, the price goes up but that's not raising the market cap on its own.



    Buying back shares doesn't necessarily raise the value placed on the company by traders (the market cap). It might create some upward momentum but it might not.



    Apple's net income fell in 2013 to $37b. I expect Q1 2014 might show some gains over the year ago quarter but if not, the expectation going forward should be that they'll bring in roughly $40b per year. Say this keeps up for 5 years and they make another $200b and this increases their ~$140b cash, does that increase their market cap at all? The current value has to already assume this is the case anyway.



    What event is going to raise Apple's market cap? Growth is slowing down. There's no existing major hardware market left to tackle that would grow their income significantly.



    I suppose if they keep hauling in $40b every year for the next 20 years and never spend it, their cash/securities would be crazy but I don't think they'll do that. It's possible though as they've not really indicated what they want to spend it on.



    Here's the thing that I don't get about the buyback urgency. Assuming Apple is taking shares off the table, there's no missed opportunity for them if they don't speed up the buyback. The missed opportunity is for remaining investors. However, if the company is undervalued then the market will eventually correct itself at which point Apple still has the cash/securities AND the share price is up.



    If the share price stays the same or goes down after a year, what difference does it make buying it now or in a year's time? If it goes up, they don't need to buy it back.

    They're valued lower than Apple.

    Um, no, they are not valued lower.  AMZN has a p/e of 1500 and Google has a p/e of 29.  Apple has a p/e of 9 x cash.

  • Reply 84 of 85
    MarvinMarvin Posts: 15,271moderator
    robbiuno wrote: »
    He is simply trying to manipulate the market to suit himself. I thought there were rules against that.

    That's evident here too:
    sog35 wrote:
    No one really cares about Market Cap. i don't care if the market cap is the same but if the stock price goes up 30% I'd be really happy.

    In other words, it doesn't matter if Apple's value goes up, it's all about how much their own stock is worth. This counters the rhetoric about Apple being undervalued - in reality it doesn't matter, they just want the price up so they can profit. When trying to convince other people it's a good idea, it's about how Apple would save hundreds of millions while spending billions and that's basic math about why it's good. Or how it benefits all shareholders when it's really just the ones that know about an increased buyback. Why would anyone sell their stock if they knew Apple had plans to accelerate a buyback?

    Stock buybacks are described as a way of 'giving money back to the shareholders' because that's what's happening. This doesn't really benefit Apple unless they were to reissue the shares they bought back later on at a higher price. There's already a large commitment to buying back shares, if Apple has no other plans for the money then they can do it at a later date.

    If people are genuinely interested in being long-term investors, what's the rush?
    jack baker wrote:
    Um, no, they are not valued lower. AMZN has a p/e of 1500 and Google has a p/e of 29. Apple has a p/e of 9 x cash.

    That ratio's for growth potential - potential isn't current value. The overall present company value is their market cap and Apple's is higher than any other company:

    http://www.investopedia.com/terms/m/marketcapitalization.asp

    "Definition of 'Market Capitalization'
    The total dollar market value of all of a company's outstanding shares."
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