According to Carl Icahn, Apple stock is severely undervalued.
Forbes is reporting that Icahn, his son Brett, and colleague David Schechter have sent an open letter to Apple CEO Tim Cook that Apple stock is undervalued. Icahn feels the stock should be at $240 per share. After Monday’s gain of one percent, Apple shares are trading at just under $130 per share.
Icahn adjusted his target price from his October valuation of $216 per share. Icahn also feels that Apple stock is worth about 86 percent more than Monday’s close.
“Apple is poised to enter and in our view dominate two new categories (the television next year and the automobile by 2020) with a combined addressable market of $2.2 trillion, a view investors don’t appear to factor into their valuation at all,” Icahn writes.
Though Apple has given no official indication they will enter the car market, Icahn points to where Apple’s current research and development dollars are going, plus Icahn feels that forays into television and cars are the next logical step.
Icahn is forecasting an earnings increase of $12 dollars per share in fiscal 2016 for Apple, much higher than Wall Street analysts think. Icahn also feels that Apple’s earning will meet 18 percent growth, which is in line with the S&P 500 belief, but far higher than the 10 percent the stock market is predicting.
According to the Economic Times, Icahn and other investors forced Apple to restructure their share repurchasing program, from $90 million to $140 million. Icahn’s action raised Apple’s quarterly dividend share to 11 percent, or 52 cents per share.
Icahn has urged Apple for a while to boost their repurchasing program to boost dividends. Icahn, one of Apple’s top ten investors, now owns almost 53 million shares with a value of $6.8 billion.
“It is our belief that large institutional investors, Wall Street analysts and the news media alike continue to misunderstand Apple,” Icahn wrote.
Apple investors, including Icahn, have long been disappointed with Apple regarding television sets. For the longest time, Apple has been expected to create a television set to work in conjunction with their Apple TV. However, the word now is that Apple is working on a streaming service instead, which would allow Apple TV owners to stream applications such as Netflix to their current televisions. However, Apple’s service would also allow for more live streaming channels that are becoming more popular, such as HBO Now and Sling TV. This would eliminate the need for cable or satellite service.
Neither Apple nor Icahn could be reached for comment.