Icahn also said that he likes Apple Inc. (NASDAQ:AAPL)’s CEO Tim Cook, whom he considers a great manager and one who is “obsessed” with the company. “Every fifty years you get a company like this that has everything going for it,” Icahn added.
Icahn has been claiming that Apple Inc. (NASDAQ:AAPL) is undervalued for several months now. In February, the investor published a letter to his Twitter followers saying, among other things, that Apple, trading at 10 times earnings, is valued by the market at a significant discount in comparison to the S&P 500 Index, which has a P/E of 17. The letter that was published on Icahn’s website Shareholder’s Square Table stated that Icahn values Apple at a P/E of 20x, which would value the stock at around $216, including $22 per share that the company has in cash. “This is not a future price target. $216 is what we think Apple is worth TODAY. Also, to the extent Apple introduces a TV in FY 2016 or FY 2017, we believe this 20x multiple is conservative,” the letter added.
Moreover, on April 28, prior to Apple Inc. (NASDAQ:AAPL) releasing its financial results for the first quarter, Icahn tweeted that Apple is still “undervalued and misunderstood” and said that he would issue a new report within a couple of weeks.
So far, Icahn holds 52.76 million shares of Apple (as of the end of 2014). The stock has climbed 13% since the beginning of the year, fueled by strong financial results for the first quarter that beat the estimates and came above the results for the same period of 2014.
Apple Inc. (NASDAQ:AAPL) is the most popular stock among hedge funds, as we determined from the previous round of filings with a total of 149 investors holding $20.88 billion worth of stock. However, when we break down this figure, we can see that aside from Icahn, who owns the largest portion of this aggregate position (around $5.82 billion), the rest 148 funds hold slightly more than 2% of the company. Therefore, this shows that “smart money” aren’t so overweight the company how it seems at first look.
Nevertheless, Apple Inc. (NASDAQ:AAPL) has one of the most profitable businesses and it has been growing its dividend and has one of the largest capital return programs among the companies from the S&P 500. Some of the greatest investors, such as Icahn, are still bullish on the company. Another example is David Einhorn of Greenlight Capital, who in the latest letter to investors also said that market values Apple at a sizeable discount. His thesis about the company hasn’t changed much over the last five years during which Greenlight held shares of the company and the value of the stock jumped by more than 2.5 times.
Disclosure: none
