In an open letter published this week, activist investor Carl Icahn praised Apple CEO Tim Cook for wanting to give money back to investors, and said he believes Apple stock should be currently valued at $216 per share.
“We were pleased to hear Tim Cook yesterday state publicly: ‘By and large, my view is, for cash that we don’t need – with some level of buffer – we want to give it back [to shareholders]. It may come across that we are, but we’re not hoarders.’ This position with respect to excess cash is great news for shareholders, and we look forward to the capital return program update in April, anticipating it will include a large increase to share repurchases.”
Icahn says the company’s current share price should be incentive for Apple CEO Cook and his board of directors to buy back more shares of the stock.
“This position with respect to excess cash is great news for shareholders, and we look forward to the capital return program update in April, anticipating it will include a large increase to share repurchases,” Icahn wrote.
Apple was sitting on a massive $179 billion in cash at the close of the last quarter. Apple has continued to use some of its cash hoard to buy back shares, and make dividend payments to investors.
Apple indicated recently that it will revisit and update its dividend and buyback plans in April.
Icahn praised Apple and its products, saying he was looking forward to the introsuction of the Apple Watch.
“It is now plainly obvious to us that there will be no stopping Apple’s peerless innovation track record and best-in-class ecosystem of services, software, and hardware, and that Apple will continue dominating the premium smartphone market by continuing to take premium market share from Google’s Android operating system (and Android-device manufacturers) while at the same time maintaining or growing average selling prices and gross margins. We look forward to the introduction of the Apple Watch in April, as well as the launch of other new products in new categories.”
Although AAPL shares are trading at all-time highs, Icahn still believes the stock is undervalued, saying the market should value the stock at a price to earnings ratio of at least 20 times. “This is not a future price target,” Icahn wrote. “$216 is what we think Apple is worth TODAY.”