Icahn to Apple: You’re Too Cheap

3 minute read

Apples for sale. Half priced!

That’s the message today from Carl Icahn, in a letter to Apple CEO Tim Cook that he first teased yesterday. The activist investor believes that Apple AAPL 2.08% stock is trading at a P/E multiple of less than half of where it should be for fiscal 2015, and therefore wants the company to significantly increase its stock buyback program.

To be sure, this is not a surprise. Icahn first began agitating for Apple to buy back more stock nearly one year ago, when he first disclosed a position in the company. He even went so far as to launch a proxy campaign, but backed off after the company repurchased around $14 billion of shares. Sure it was a mere $136 billion less than what Icahn had wanted, but he got good value from the ensuing stock spike.

Since then, Icahn has kept accumulating Apple shares. He now holds around 53 million of them, giving him just shy of a 1% stake in the company. This time around, he is not providing a specific amount of shares he wants Apple to repurchase, but is promising that he would not sell any of his in a tender offer.

A few other highlights from Icahn’s letter, which you can read in full by going here.

  • “Given historically high retention rates, we assume existing iPhone users will continue to act like an annuity, choosing to stay with the iPhone each time they upgrade.”
  • “We expect the impact of the acquisition of Beats and accessory growth moving forward to more than offset the continued decline of iPod, which is already relatively immaterial to net sales.”
  • “Over the next three years, we expect the Apple Watch to have a significant impact on Apple’s growth…As an accessory to the iPhone (model 5 or thereafter), we believe we have included in our forecast sales for the Apple Watch that imply a reasonable attach rate to the iPhone, with unit sales volume resembling that of the iPad in scale, and ramping at a similar incline, selling 20 million units in FY 2015, 45 million units in FY 2016, 72.5 million units in 2017.”
  • “While Apple has not announced plans for a TV set and may never do so, we believe we have good enough reason to expect the introduction of an UltraHD TV set in FY 2016.”
  • Apple shares are up nearly 1% in premarket trading.

    This post originally appeared on Fortune.com.

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