Carl Icahn's praise should help create a floor for shares of Apple, RBC says
While billionaire Carl Icahn is unlikely to get his way with Apple, his assessment that the company's stock is massively undervalued should help establish a floor for the stock, preventing it from going below about $95, one analyst believes.
Amit Daryanani of RBC Capital Markets issued a note to investors this week, in which he offered a reaction to Icahn's push for an increased share buyback plan from Apple. Icahn said on Thursday that he believes shares of Apple are "extremely undervalued," and should currently be priced at $203, or about twice their current value.
Daryanani isn't quite as aggressive, but has maintained a price target of $114 for AAPL stock, and an "upside scenario" of $125. In his view, Icahn's praise for Apple "helps create a floor for the stock," where he doesn't think the market will allow shares to drop below around the $95 mark.
Shares of Apple have been hovering between $98 and just over $102 since mid-August, and haven't traded in the $95 range since early August.
But despite Icahn's pressure, Daryanani doesn't expect an "imminent change" to Apple's capital reinvestment program. The company itself also signaled it's in no rush, issuing a statement on Thursday saying it reviews its share buyback program annually.
"Since 2013 we've been aggressively executing the largest capital return program in corporate history," the company said. "As we've said before we will review the program annually and take into account the input from all of our shareholders."
Since Apple first announced its dividend share and repurchase program in 2012, the company thus far has announced any changes to the plan in April, when it discloses its March quarterly results. Most recently, the company announced this April that it would once again increase its buyback efforts and undergo a 7-for-1 stock split, which came to pass in June.
Looking forward, Daryanani sees a number of potential catalysts remaining for Apple. In particular, he's anticipating the release of the iPhone 6 in China on Oct. 17, as well as potential average selling price and gross margin increases.
"We believe the large demand for the iPhone combined with a solid holiday season should result in gross margins approaching the 40% barrier to help quell investor fears about long-term margin structure issues," he said.
Amit Daryanani of RBC Capital Markets issued a note to investors this week, in which he offered a reaction to Icahn's push for an increased share buyback plan from Apple. Icahn said on Thursday that he believes shares of Apple are "extremely undervalued," and should currently be priced at $203, or about twice their current value.
Daryanani isn't quite as aggressive, but has maintained a price target of $114 for AAPL stock, and an "upside scenario" of $125. In his view, Icahn's praise for Apple "helps create a floor for the stock," where he doesn't think the market will allow shares to drop below around the $95 mark.
Shares of Apple have been hovering between $98 and just over $102 since mid-August, and haven't traded in the $95 range since early August.
But despite Icahn's pressure, Daryanani doesn't expect an "imminent change" to Apple's capital reinvestment program. The company itself also signaled it's in no rush, issuing a statement on Thursday saying it reviews its share buyback program annually.
"Since 2013 we've been aggressively executing the largest capital return program in corporate history," the company said. "As we've said before we will review the program annually and take into account the input from all of our shareholders."
Since Apple first announced its dividend share and repurchase program in 2012, the company thus far has announced any changes to the plan in April, when it discloses its March quarterly results. Most recently, the company announced this April that it would once again increase its buyback efforts and undergo a 7-for-1 stock split, which came to pass in June.
Looking forward, Daryanani sees a number of potential catalysts remaining for Apple. In particular, he's anticipating the release of the iPhone 6 in China on Oct. 17, as well as potential average selling price and gross margin increases.
"We believe the large demand for the iPhone combined with a solid holiday season should result in gross margins approaching the 40% barrier to help quell investor fears about long-term margin structure issues," he said.
Comments
Nonsense. Wall St is fickle. There's no such thing as a floor for prices.
Well, given all of their financial assets, there is probably some price at which Apple would come in and scoop up some shares whenever it touches that level, even if Apple had to hit the debt markets again. That sets a floor, of sorts. Unfortunately, we don't know what that number would be, so it is an unknown (and only temporary) floor. So this is probably just an academic point instead of a useful one.
Thompson
A few months ago, I had a gentleman's bet with TS that Apple would reach one trillion dollars in valuation by May 2015. He bet June 2015. I guess we were probably optimistic, especially me, but, alas, I fear that Apple won't get anywhere near it now, and if the market carries on the way it is at the moment, my profits will be diminishing for the next year.
I would love to be proved wrong.
I’ll bet the stock price will at least be 110 by the end of this year, given the iPhone 6 regular market and China.
I agree. Above that seems unrealistic given that most economies are still on shaky ground and are propped up with stimulus programs that are unsustainable. Once markets can crash/collapse and stocks come back on their own (without bailouts and the like), we'll see realistic growth levels.
I’ll bet the stock price will at least be 110 by the end of this year, given the iPhone 6 regular market and China.
I agree. Above that seems unrealistic given that most economies are still on shaky ground and are propped up with stimulus programs that are unsustainable. Once markets can crash/collapse and stocks come back on their own (without bailouts and the like), we'll see realistic growth levels.
Indeed.
I can't help but feel that the world would have recovered much better if there had been no bailout whatsoever anywhere. The crash would have been worse but shorter, and recovery would have been stronger and built on a solid foundation. It's like a bad storm that gets rid of all the flotsam and dead wood. Because there's been an artificial stimulus to repel the storm, the flotsam has been allowed to linger and fester.
Carl should purchase GTAT!
Off the record: we can certainly manipulate that with unfounded rumors: Chinese teens hate the iPhone 6.
Nonsense. Wall St is fickle. There's no such thing as a floor for prices.
This article is utter tripe. Wall Street will go any way it chooses without rime or reason. That's why Apple should not pay lip service to it and continue creating consisten value (that is what introduces a floor to the price)
Macs need to be even better differentiated, touch ID on all macs for starters.
Indeed.
I can't help but feel that the world would have recovered much better if there had been no bailout whatsoever anywhere. The crash would have been worse but shorter, and recovery would have been stronger and built on a solid foundation. It's like a bad storm that gets rid of all the flotsam and dead wood. Because there's been an artificial stimulus to repel the storm, the flotsam has been allowed to linger and fester.
In complete agreement on this.
I'm just grateful that the timing of Icahns letter was perfect to keep AAPL price from losing to much ground. If there was no Icahn letter, I think AAPL would be at 96 this Friday.
I'm just grateful that the timing of Icahns letter was perfect to keep AAPL price from losing to much ground. If there was no Icahn letter, I think AAPL would be at 96 this Friday.
Give me a BREAK! IS this a joke. Next you're going to tell me Santa Claus is keeping Apple's stock high.
Exactly why is the opinion of one analyst, this particular analyst, worthy of an AI article…other than it is positive toward Apple?
Ah; so now you know.
In my personal opinion... lol... the shorts were looking for a repeat of Apple's dramatic fall after reaching about 700.
So a lot of money was bet on AAPL's decline after the iPhone 6 and watch announcement.
Last time, the manipulation was, claiming the 5C was a big flop, when of course, it kicked even the Galaxy's ***.
This time, we get hairgate, bendgate, and now sapphiregate.
Icahn's letter will help stop the shorts from having their way in the near term.
Also helping was the delay of the launch of the 6 in China. This is causing the good news to get strung out over multiple quarters.
Also helping will be the coming announcement of additional new products for the holidays.
Also helping will be the surprising success of the Apple Watch (surprising only because mainstream media is run by business and tech people who don't necessarily grasp the value of a fashion brand).
All the above makes the shorts' mission of tanking the stock very difficult. The negative narrative about Apple is just quite challenging for them to tell convincingly.
So I PERSONALLY predict that the shorts will lose their shorts. No, more. The shorts will have to eat their shorts.
(Unless the whole market tanks due to other disturbing world news etc).