Icahn says bigger buybacks can drive Apple shares to $700

Activist investor Carl Icahn said he has amassed a "large position" in Apple and believes the stock could be worth as much as $700 a share if chief executive Tim Cook pushed for a larger stock buyback.

Mr Icahn said on Twitter that he had a “nice conversation” with Mr Cook on Tuesday and they planned to speak again soon. Apple confirmed the conversation took place, but did not say if it influenced management’s view of buybacks.

Mr Icahn said the iPhone, iPad and Mac computer-maker has the ability to do a $150 billion buyback now by borrowing funds at 3 per cent.

“If Apple does this now and earnings increase at only 10 per cent, the stock – even keeping the same multiple currently – should trade at $700 a share.”

Apple has “huge borrowing power, little relative debt and trades at a low multiple”.

Mr Icahn, who this year launched an assault on Michael Dell’s $25 billion effort to take Dell private, did not say how many shares of Apple he holds.

A source familiar with the matter, who declined to be named, said the investor’s stake was worth about $1 billion, a fraction of the company’s market value of more than $400 billion. US rules require investors to disclose stakes of 5 per cent or larger within 10 days of hitting that threshold.

In April, Apple bowed to Wall Street pressure and said it would return $100 billion to shareholders by the end of 2015 – double the amount set aside previously. It got there in part by raising its dividend 15 per cent and boosting its share buyback programme sixfold to $60 billion. The news gave Apple shares a lift, but they remain down more than 30 per cent since a record high of $702.10 in September 2012, pummelled by growth fears, thinning margins and competition from Samsung Electronics. – (Reuters)