Carl Icahn sets new Apple target of $240 per share, valuing company at $1.4 trillion

Posted:
in AAPL Investors edited May 2015
In his latest open letter to Apple Chief Executive Tim Cook, billionaire activist investor Carl Icahn has said he believes shares of the company should currently be trading at more than $100 higher than their current valuation.

Icahn
Activist investor Carl Icahn. | Source: Forbes


Icahn's $240 price target for Apple is what he believes the company should be trading at today, not in 12 months. At a value more than 80 percent higher than the company's current stock price, his assessment would push Apple's market capitalization to nearly $1.4 trillion.

The Apple shareholder's take was published on his website, Shareholders' Square Table, on Monday. In the letter, Icahn praised Cook and Apple's management team for the company's continued growth.

His valuation of $240 per share forecasts fiscal year 2016 earnings per share of $12.00, plus net cash of $24.44 per share.

Icahn believes Apple will enter the television market next year, and will sell an automobile by the year 2020. His predictions call for the company to "dominate" those product categories.

The investor also commended Apple for repurchasing $80 billion worth of shares, but once again pushed the company to buy back even more. While he welcomed the recent $50 billion buyback increase announced in April, Icahn also believes Apple could do more to return value to shareholders and invest in itself.

"It is our belief," Icahn wrote, "that large institutional investors, Wall Street analysts and the news media alike continue to misunderstand Apple and generally fail to value Apple's net cash separately from its business, fail to adjust earnings to reflect Apple's real cash tax rate, fail to recognize the growth prospects of Apple entering new categories, and fail to recognize that Apple will maintain pricing and margins, despite significant evidence to the contrary Collectively, these failures have caused Apple's earnings multiple to stay irrationally discounted, in our view."




Back in February, Icahn had publicly set a $216 price target for shares of AAPL, again a value he said the company was worth at the time, not in the future.

In the past, Icahn called Apple's cash position an "excessive liquidity," which he believes should spur the company to adopt a "more aggressive pace" in buying back its own shares. While Icahn has praised Cook and Apple's management team for making blockbuster products, he has taken issue with their financial management.

But the relationship between Icahn and Apple is far less contentious than in late 2013, when Icahn attempted to file a shareholder proxy vote to push Apple to repurchase more of its own shares. Icahn eventually dropped that initiative after Apple bought some $14 billion worth of its own shares in a matter of weeks in early 2014.

As of August 2014, Icahn had some 45 million shares in AAPL stock, making him a considerable investor in the iPhone maker. His position in the company, and stature on Wall Street, earned him a private meeting with Cook in 2013.
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Comments

  • Reply 1 of 75
    anantksundaramanantksundaram Posts: 20,225member

    So, Mr. Icahn, what's going to make Apple's PE jump? What's so new about the market's perceptions of Apple's growth opportunities the next year that has not been true of the past?

  • Reply 2 of 75
    SpamSandwichSpamSandwich Posts: 33,408member
    He's the ultimate cheerleader for AAPL (as long as he's not trying to short it), but even he can't seem to move the stock much. It's baffling.
  • Reply 3 of 75
    So, Mr. Icahn, what's going to make Apple's PE jump? What's so new about the market's perceptions of Apple's growth opportunities the next year that has not been true of the past?

    He's just trying to create a bubble to pump up his own holdings. The stock market is nothing but a way to make the rich richer.
  • Reply 4 of 75
    SpamSandwichSpamSandwich Posts: 33,408member
    He's just trying to create a bubble to pump up his own holdings. The stock market is nothing but a way to make the rich richer.

    Keep in mind that a lot of people here have become rich thanks to owning AAPL. I don't blame "rich people" for defending their interests, which is the same as anyone else.
  • Reply 5 of 75
    rogifanrogifan Posts: 10,669member
    Here's what Carl says about the car:

    [QUOTE]At $1.6 trillion, the enormous addressable market for new cars is approximately four times the size of the smartphone market. It’s estimated that people spend an average of 1 hour every day traveling, mostly in cars, but not everyone drives, implying that the average time that daily commuters spend in a car is much higher. We believe the rumors that Apple will introduce an Apple-branded car by 2020, and we believe it is no coincidence that many believe visibility on autonomous driving will gain material traction by then.

    As autonomous driving would release drivers’ attention from the activity of driving and navigating, and perhaps even increase the time people actually want to spend inside a car, both an automobile and the services provided therein become even more strategically compelling. While Apple currently addresses this market with CarPlay, it seems logical that Apple would view the car itself as a the ultimate mobile device to which it could bring its peerless track record of marrying superior industrial design with software and services, along with its globally admired brand, and offer consumers an overall automobile experience that not only changes the world but also adds a robust vertical to the Apple ecosystem. And for Apple, the car market is more than big enough to “move the needle” significantly, even as the world’s largest company.[/QUOTE]

    The car seems more believable to me than a television set. People don't want 'smart' TVs. They want smart boxes and dumb TVs. What point is there for Apple to get in that business?
  • Reply 6 of 75
    macinthe408macinthe408 Posts: 1,050member
    This guy should be Apple's next CEO. Then again, he's just a Monday morning quarterback who has a lot of money. Guys with a lot of money get to do a lot of things they aren't qualified to do.

    For example, the funniness of someone's joke is directly proportional to how much money/power they have? This guy can do a Knock Knock joke and have the room in tears; if Louis C.K. walks in afterwards, it'd be crickets, crickets I tell you!
  • Reply 7 of 75
    SpamSandwichSpamSandwich Posts: 33,408member
    If Apple does in fact have an Apple Car in the works, my wallet is ready.
  • Reply 8 of 75
    anantksundaramanantksundaram Posts: 20,225member
    Quote:

    Originally Posted by Suddenly Newton View Post





    He's just trying to create a bubble to pump up his own holdings. The stock market is nothing but a way to make the rich richer.

    Nothing wrong at all with the rich getting richer as long as the poor don't get poorer. Unless someone else's improvement in well-being makes you envious (even when your own has improved).

  • Reply 9 of 75

    I have 10,924 Apple Shares, PLUS 266 Options (Jan-2015 85 strike approx) PLUS several Roths/Iras allocated about 90% to Apple Stock.

     

    I have listened to the nonsense / "smart talk" from the genius posters above (responding to Mr. Icahn's comments) for around 4 years - as I have literally made millions on Apple .. I knew Jobs set up once in generation company - talent - mindset - and that he set us up for the future with Mr. Cook.

     

    A 15 multiple for a company so set with talent, Jobs' mindset, implimented by Cook and approved - without backing up cash... is a joke.. with such growth obviously ahead in China/India - and frankly everywhere with items not even pinched (pending TV, Applewatch not even rolled out to stores ... likely Sept given over the top growth).

     

    I am a good numbers guy - finance - NYU Tax Lawyer.

     

    Apple is once in a lifetime.   80% of my holdings - thank you Tim.   Follow that with Disney, Starbucks and Facebook - this is the portfolio of a lifetime ... the core being Apple.

     

    Carl - you are so right on.

  • Reply 10 of 75



    Ignorance / stupidity of the past is your evaluation of the future??????

     

    Wrongo - look at the price .. as joe blow investor has caught on - price has exploded.  Only issue .. not nearly enough - Carl is pointing this out .. I have made millions thanks to Carl's screaming - and I will make millions more .. the public is not so smart - they don't get that their "broker" is not interested in telling them to just buy Apple and hold - the broker makes money on clients buy/selling many stocks - not holding.

     

    Carl is educating joe blow that they need 1 stock - apple

  • Reply 11 of 75
    dr millmossdr millmoss Posts: 5,403member
    Interesting stuff, and for AAPL investors, well worth reading the letter in its entirety. His method of valuing cash is bound to be controversial (and importantly, underpins his calculation of multiples), and it's a bit surprising to hear him being so bought-in on the car rumors. The most interesting of the comments aren't about pushing for a more aggressive buybacks program (always the headline in Icahn stories), but the references to the "mega-ecosystem" of interlocking products that he sees Apple producing.

    The criticisms of Icahn are predictable, but anyone who invests in AAPL has to love the level of interest he has shown. His mouth and his money are in the same place.
  • Reply 12 of 75
    anantksundaramanantksundaram Posts: 20,225member
    Quote:
    Originally Posted by nyuestateplanninglawyer View Post

     

    I have 10,924 Apple Shares, PLUS 266 Options (Jan-2015 85 strike approx) PLUS several Roths/Iras allocated about 90% to Apple Stock.

     

    I have listened to the nonsense / "smart talk" from the genius posters above (responding to Mr. Icahn's comments) for around 4 years - as I have literally made millions on Apple .. I knew Jobs set up once in generation company - talent - mindset - and that he set us up for the future with Mr. Cook.

     

    A 15 multiple for a company so set with talent, Jobs' mindset, implimented by Cook and approved - without backing up cash... is a joke.. with such growth obviously ahead in China/India - and frankly everywhere with items not even pinched (pending TV, Applewatch not even rolled out to stores ... likely Sept given over the top growth).

     

    I am a good numbers guy - finance - NYU Tax Lawyer ... you guys are clueless and ignorant.

     

    Apple is once in a lifetime.   80% of my holdings - thank you Tim.   Follow that with Disney, Starbucks and Facebook - this is the portfolio of a lifetime ... the core being Apple.

     

    Carl - you are so right on .. the dummies here are just ignorant deluxe/overload.


    It's never a good idea to confuse luck with skill, but hey, it's your money...

     

    (Add: Oh, I've got quite a bit in AAPL too -- got in early and held on -- but my portfolio is better diversified. Many other parts of the portfolio have done as well, if not better. But like I said, each to his own.)

  • Reply 13 of 75

    Cry and complain while you stick your head in the sand - the writing is on the wall how to make $$$ - buy Apple and hold it .... just like Starbucks employees do with their stock/gift from Schultz

     

    Stop complaining - work hard and use your brain .. stop complaining about others working harder and using their brains

  • Reply 14 of 75
    SpamSandwichSpamSandwich Posts: 33,408member
    I have 10,924 Apple Shares, PLUS 266 Options (Jan-2015 85 strike approx) PLUS several Roths/Iras allocated about 90% to Apple Stock.

    I have listened to the nonsense / "smart talk" from the genius posters above (responding to Mr. Icahn's comments) for around 4 years - as I have literally made millions on Apple .. I knew Jobs set up once in generation company - talent - mindset - and that he set us up for the future with Mr. Cook.

    A 15 multiple for a company so set with talent, Jobs' mindset, implimented by Cook and approved - without backing up cash... is a joke.. with such growth obviously ahead in China/India - and frankly everywhere with items not even pinched (pending TV, Applewatch not even rolled out to stores ... likely Sept given over the top growth).

    I am a good numbers guy - finance - NYU Tax Lawyer ... you guys are clueless and ignorant.

    Apple is once in a lifetime.   80% of my holdings - thank you Tim.   Follow that with Disney, Starbucks and Facebook - this is the portfolio of a lifetime ... the core being Apple.

    Carl - you are so right on .. the dummies here are just ignorant deluxe/overload.

    No one likes a boastful "winner". You should be a bit more modest, although I do appreciate the enthusiasm for Apple.
  • Reply 15 of 75
    rogifanrogifan Posts: 10,669member
    Nothing wrong at all with the rich getting richer as long as the poor don't get poorer. Unless someone else's improvement in well-being makes you envious (even when your own has improved).

    Politicians do a good job of making sure the poor stay poor. That's the only way to ensure they get reelected.
  • Reply 16 of 75
    Quote:
    Originally Posted by nyuestateplanninglawyer View Post

     

    Apple is once in a lifetime.   80% of my holdings - thank you Tim.   Follow that with Disney, Starbucks and Facebook - this is the portfolio of a lifetime ... the core being Apple.

     

    Carl - you are so right on .. the dummies here are just ignorant deluxe/overload.


     

    Disney? <img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />

     

    You don't see it, do you? You see that Iger's brought up profits and that's it. You don't see the serious structural issues in the company, the creative rot? Disney is a disaster waiting to happen. You realize it took what was one of the most innovative companies years to develop a wristband system, and that they ended up needing outside help because of political infighting and general lack of ability? You don't see that an increasing amount of films are just remakes or rehashes of older stuff? That Pixar's starting to show issues?

  • Reply 17 of 75
    anantksundaramanantksundaram Posts: 20,225member
    Quote:

    Originally Posted by Rogifan View Post





    Politicians do a good job of making sure the poor stay poor. That's the only way to ensure they get reelected.

    That is a silly statement. (Not that I care for politics or politicians in the least).

  • Reply 18 of 75
    dr millmossdr millmoss Posts: 5,403member
    Quote:

    Originally Posted by anantksundaram View Post

     

    So, Mr. Icahn, what's going to make Apple's PE jump? What's so new about the market's perceptions of Apple's growth opportunities the next year that has not been true of the past?




    If you read the article, he isn't actually predicting a jump in PE. What he's saying mainly is that PE should be discounted for the balance sheet, so it's now "really" closer to 10 today, rather than 17.

  • Reply 19 of 75
    nightskynightsky Posts: 43member

    I'm sick of this guy whining every five minutes. You're rich enough mate so just **** off and die.

  • Reply 20 of 75
    rogifanrogifan Posts: 10,669member
    That is a silly statement. (Not that I care for politics or politicians in the least).

    Not at all. The easiest way to get elected and ensure reelection is to hand out goodies (aka benefits) to constituents.
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