“Hedge fund billionaire Carl Icahn took a ‘large’ position in Apple Inc. shares and told Reuters on Tuesday that he believes Apple should trade at $700 a share,” Edwin Chan and Jennifer Ablan report for Reuters.
“The billionaire with a reputation for pushing aggressive corporate change said he had a ‘nice conversation’ with Cook on Tuesday and they plan to speak again soon,” Chan and Ablan report. “News of Icahn’s interest in Apple pushed the stock up 4.75 percent to $489.57 on the Nasdaq. Icahn said in a phone interview that Apple has the ability to do a $150 billion buyback now by borrowing funds at 3 percent. ‘If Apple does this now and earnings increase at only 10 percent, the stock – even keeping the same multiple currently should trade at $700 a share,’ he told Reuters. Apple has ‘huge borrowing power, little relative debt and trades at a low multiple,’ Icahn added.”
Chan and Ablan report, “Icahn called the iPhone maker ‘extremely undervalued’ in one of two tweets about Apple on Tuesday.”
Read more in the full article here.
Ian Sherr and David Benoit report for The Wall Street Journal, “The activist investor didn’t disclose the size of his stake. A person familiar with the position put his investment at over $1 billion.”
“Mr. Icahn’s thesis rests on Apple borrowing at about a 3% interest rate and buying back shares right now, likely at around $525 a piece,” Sherr and Benoit report. “That would send shares to $625, Mr. Icahn says, without taking into account any earnings growth.”
“Mr. Icahn said in the interview Tuesday that he made the investment on the advice of his son Brett Icahn and investment partner David Schechter, who have been looking at the technology sector for Icahn Enterprises,” Sherr and Benoit report. “Those two also led Mr. Icahn’s successful investment in video provider Netflix Inc. where they have made $1 billion in less than a year. They pitched Mr. Icahn on Apple’s solid cash position and its ability to borrow with ease to fund a massive stock buyback, Mr. Icahn said.”
Sherr and Benoit report, “They also are bullish on Apple’s ability to increase earnings, and expressed enthusiasm over the possibility that Apple’s coming products, such as the much-reported watch and television, will drive sales. Mr. Icahn says though his son and investment partners are more familiar with technology, he likes playing chess on his iPad.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Arline M.” for the heads up.]
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