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Carl Icahn's praise should help create a floor for shares of Apple, RBC says

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.

The New York Stock Exchange, credit Carlos Delgado via Wikipedia.

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.