Apple ‘Dramatically Undervalued’: Icahn Calls For Buy-Back
In the letter, Icahn praises Apple CEO Tim Cook, “especially in light of recent launches and announcements which further validate our view that you are the ideal CEO for Apple”.
However, he states a combination of factors have seen a “massive undervaluation of Apple in today’s market”, which will not last for long.
Icahn values Apple at US$203 per share, around double its current price.
As such, he has requested the company make a tender offer, which would “meaningfully accelerate and increase the magnitude of share repurchases”.
In turn, Icahn has committed not to tender any shares if Apple consummates any form of a tender offer at any price.
“You have said before that the company likes to be ‘opportunistic’ when repurchasing shares and we appreciate that,” he states, noting now is a “very opportunistic time” to do so, asking Cook to convince the board to “repurchase a lot more, and sooner”.
“We feel compelled to do so because we forecast such impressive earnings growth over the next few years, and therefore we believe Apple is dramatically undervalued in today’s market, and the more shares repurchased now, the more each remaining shareholder will benefit from that earnings growth,” Icahn states.
Critical to this forecast is a belief the iPhone will take significant premium market share.
With the iPhone now offering a larger screen, Icahn states its competitiveness in the premium phone market is clear.
“Perhaps most importantly, we believe the iPhone will take market share because its merits are no longer viewed in isolation from the overall Apple ecosystem of products and services, which include iOS, iPad, Mac, Apps, App Store, iCloud, iTunes, and (more recently) Apple Watch, Apple Pay, Home, Health, Continuity, Beats,” Icahn states.
“With the iPhone as the foundation, Apple’s ecosystem has come to play an important role in the daily life of Apple users, and while Apple continues to make impressive strides to improve it, the competition falls behind in what is arguably the most important race of this technological era.”