It’s been a huge week for Apple’s financials, as the company became the first in history to break $700 billion in market capitalization. But billionaire investor Carl Icahn says there’s a more realistic valuation that should bump up Apple’s stock price to value the company at $1.3 trillion.
As of this writing, Apple stock hovers around $125, the highest watermark in a trend of dramatic increase since its stock sold for under a dollar in April 2003. But in a letter to his Twitter followers, Icahn said a more realistic valuation would be 20 times Apple’s earnings per share metric (instead of its current valuation of 10 times), and including Apple’s $178 billion in cash reserves, Apple’s stock price should be $216 per share. Ergo, Apple would be valued at $1.3 trillion.
Icahn’s letter also proposes a model of an earnings per share growth of 20% per year–or 31%, if Apple introduces a rumored TV. Icahn again pushed Apple CEO Tim Cook to take advantage of this market undervaluation and have the company buy back shares of its stock. Icahn pushed Cook to increase Apple’s stock buyback program back in August 2013 when Apple stock was trading at just over $66, and again in October 2014 when Apple stock hit $100.
To be fair, Icahn isn’t Apple agnostic–his company is one of Apple’s 10 biggest shareholders, holding $6.5 billion in company stock.