Carl Icahn Sees Apple (AAPL) Stock Worth $240/share

Apple Tim Cook

Shares of Apple Inc (AAPL) are up 0.49% to $129.40 in late morning trading Monday after billionaire activist investor Carl Icahn confirmed he had send an open letter to CEO Tim Cook, pushing for a larger share buyback.

In the letter, posted on Icahn’s “Shareholder Square Table” Web site, Icahn also says he believes AAPL is worth $240 today, predicts the iPhone maker will enter, and dominate by FY 2020, the television business and the automobile business, and urges that “now is the time for a much larger buyback.”

“We are pleased that Apple has directionally followed our advice and repurchased $80 billion of its shares (yielding the company’s shareholders an excellent return), but the company’s enormous net cash position continues to grow while the company’s shares are still dramatically undervalued. With Apple’s shares trading for just $128.77 per share versus our valuation of $240 per share, now is the time for a much larger buyback. We appreciate that the Board just increased the share repurchase authorization by $50 billion, and that it continues to prioritize share repurchases over dividends (as it should). We again simply ask you to help us convince the board of how these two underlying issues (inefficient net cash growth and share undervaluation) persist and combine to enhance the opportunity for accelerated share repurchases in greater magnitude. We also ask you to help us convince the board that this is not a choice between investing in growth and share repurchases. As our model forecasts, despite more than 30% growth in R&D annually through FY 2017 to $13.5 billion (up from $1.8 billion in FY 2010) and your updated capital return program, Apple’s net cash position (currently the largest of any company in history) will continue to build on the balance sheet.”

This isn’t the first time the influential investor has set his sights on Cupertino.

In August 2013, he revealed he had made a big investment in Apple and called the shares “extremely undervalued”.

Apple’s market cap is currently more than $744 billion. The name dominates the S&P 500 index as no other company has in 30 years.

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