Icahn calls for changes at Apple
Shares of Apple (NASDAQ:AAPL) traded higher by more than $7 on Wednesday morning following the announcement active investors including Carl Icahn have amassing huge positions in the company. Yesterday shares traded higher by nearly 5%, or $22.21, to $490 per share as Icahn stated he believed the company could reasonably trade higher by more than 200 points in the coming years.
Icahn said on Twitter that he had a “nice conversation” with the company’s Chief Executive Officer Tim Cook on Tuesday. According to sources, the conversations did actually take place and the two have planned to stay in contact. After all shares have performed especially poor over the last year and shareholders have pushed for changes. Icahn is planning to ask the company to return more of its capital to shareholders through stock buybacks. Icahn told Reuters that the company has the ability to do a $150 billion buyback now by borrowing funds at 3%. Icahn was quoted in saying:
“If Apple does this now and earnings increase at only 10%, the stock – even keeping the same multiple currently – should trade at $700 a share,”
Icahn said in a phone interview. Apple has “huge borrowing power, little relative debt and trades at a low multiple.” Icahn’s position is said to be worth more than $1.5 billion. However, this number remains fairly insignificant when you consider the company holds over $450 billion in market cap, effectively making Icahn as small fish.
While Apple shareholders may be a ways away from any significant buyback. This news does help relieve some pain. Shares have traded to the downside by more than 8% while the broad market has roared higher by nearly 20%. Currently shares of the company trade at 11 times this years earnings with a PEG of only 0.84. At the end of last year the company reported its cash balance grew to $146.6 billion, yet another all time high leaving plenty of cash available for shareholder programs.
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