Neil Hughes
While billionaire Carl Icahn is unlikely to get his way with Apple, his assessment that the company's stock is massively undervalued should help establish a floor for the stock, preventing it from going below about $95, one analyst believes.
Amit Daryanani of RBC Capital Markets issued a note to investors this week, in which he offered a reaction to Icahn's push for an increased share buyback plan from Apple. Icahn said on Thursday that he believes shares of Apple are "extremely undervalued," and should currently be priced at $203, or about twice their current value.
Daryanani isn't quite as aggressive, but has maintained a price target of $114 for AAPL stock, and an "upside scenario" of $125. In his view, Icahn's praise for Apple "helps create a floor for the stock," where he doesn't think the market will allow shares to drop below around the $95 mark.
Shares of Apple have been hovering between $98 and just over $102 since mid-August, and haven't traded in the $95 range since early August.
But despite Icahn's pressure, Daryanani doesn't expect an "imminent change" to Apple's capital reinvestment program. The company itself also signaled it's in no rush, issuing a statement on Thursday saying it reviews its share buyback program annually.
"Since 2013 we've been aggressively executing the largest capital return program in corporate history," the company said. "As we've said before we will review the program annually and take into account the input from all of our shareholders."
Since Apple first announced its dividend share and repurchase program in 2012, the company thus far has announced any changes to the plan in April, when it discloses its March quarterly results. Most recently, the company announced this April that it would once again increase its buyback efforts and undergo a 7-for-1 stock split, which came to pass in June.
Looking forward, Daryanani sees a number of potential catalysts remaining for Apple. In particular, he's anticipating the release of the iPhone 6 in China on Oct. 17, as well as potential average selling price and gross margin increases.
"We believe the large demand for the iPhone combined with a solid holiday season should result in gross margins approaching the 40% barrier to help quell investor fears about long-term margin structure issues," he said.
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Malcolm Owen
William Gallagher
Christine McKee
Charles Martin
18 Comments
Nonsense. Wall St is fickle. There's no such thing as a floor for prices.
price could be justified much higher, but everyone knows financials have little to do with stock price.
Nonsense. Wall St is fickle. There's no such thing as a floor for prices.
Well, given all of their financial assets, there is probably some price at which Apple would come in and scoop up some shares whenever it touches that level, even if Apple had to hit the debt markets again. That sets a floor, of sorts. Unfortunately, we don't know what that number would be, so it is an unknown (and only temporary) floor. So this is probably just an academic point instead of a useful one.
Thompson
A few months ago, I had a gentleman's bet with TS that Apple would reach one trillion dollars in valuation by May 2015. He bet June 2015. I guess we were probably optimistic, especially me, but, alas, I fear that Apple won't get anywhere near it now, and if the market carries on the way it is at the moment, my profits will be diminishing for the next year.
I would love to be proved wrong.
I’ll bet the stock price will at least be 110 by the end of this year, given the iPhone 6 regular market and China.