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Is Carl Icahn Right About Apple Inc.?

Well-known activist investor and billionaire Carl Icahn tweeted that he has now boosted his stake in Apple (NASDAQ: AAPL  ) by $500 million to $3.6 billion, calling the company a no-brainer investment, and is continuing his fight for increased share buybacks. He has now issued an open letter, calling his fellow shareholders to arms. In his seven-page letter, he notes that the S&P 500 trades at a 71% premium to Apple, which he calls a "dramatic valuation disconnect." Icahn's annoyance with Apple's enormous cash hoard is obvious, but does his proposal make sense?

In this segment of Tech Teardown, Erin Kennedy discusses Carl Icahn and Apple with Evan Niu, CFA, our tech and telecom bureau chief. The number of Apple bears has been on the rise recently ever since the stock fell from its high in 2012 and lagged the market considerably in 2013, but Icahn has defended Apple's prospects. He believes the company's unrivaled customer loyalty will be the key to it maintaining pricing and margins going forward, and he's still bullish on Tim Cook's leadership. He also sees Apple getting into Ultra HD televisions, which he thinks could generate as much as $40 billion in revenue annually.

With Icahn having backed off from his initial call for $150 billion in buybacks and revising down to $50 billion, Evan sees that number as reasonable. He agrees that Apple does have too much cash on the books, and could see a $50 billion share repurchase before the end of the fiscal year in September as making sense.

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  • Report this Comment On January 26, 2014, at 4:40 AM, MightyMinnow wrote:

    Me and my 11 shares are voting against Icahn. He's accommodating people that want to sell out. a higher P/E and a lower yield is all the re-investor gets.

    I want a $20.00 dividend, a low market cap and p/e, and a high yield.

  • Report this Comment On January 26, 2014, at 6:55 AM, Curiosiddy wrote:

    I sent in my proxy votes last week & also voted against the Apple Board agreeing with Icahn.

    I don't think it would be a good move on Apple's part to listen to him. Hope the majority votes the same...

  • Report this Comment On January 26, 2014, at 11:48 AM, krazygranny wrote:

    as soon as Icahn gets his hands on Apple money he'll dump his stock and leave the company weak

  • Report this Comment On January 27, 2014, at 9:07 AM, prl99 wrote:

    Icahn cares only about his money, he doesn't care about Apple Inc. He wants AAPL to increase in value and Apple to buy back more shares making his existing shares more valuable. Apple Inc. is a great company that is being manipulated by Wall Street. Wall Street didn't make Apple Inc., people who bought Apple products did. Wall Street continues to try and destroy Apple Inc. by destroying AAPL. It's obvious and the SEC should investigate but they won't because they'd have to penalize just about every investment firm and analyst.

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Evan Niu

Evan is a Senior Technology Specialist at The Motley Fool. He was previously a Senior Trading Specialist at a major discount broker. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.

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