Wall Street Kingpin Carl Icahn Says Apple Is Massively Undervalued

Apple Pay lets you select from different credit cards saved to your phone. Alex Washburn / WIRED

Billionaire investor and Wall Street activist Carl Icahn believes Apple is massively undervalued. And so, in a letter posted on his website Thursday, Icahn urged the Cupertino-based company to do something about it by using its “excessive liquidity” to buy back shares of Apple stock.

Icahn has a long history of putting this kind of public pressure on companies. Just last week eBay spun off PayPal, after Icahn had goaded the company to do just that. And this is far from the first time he’s pressured Apple, in particular.

Today’s letter, which is addressed to Apple CEO Tim Cook, praises Cook’s leadership and hails Apple’s recent product launches as “a watershed moment.” And yet, according to Icahn, the company’s stock is worth more than twice the current share price, which was hovering around $101.6 per share Thursday morning. Icahn warned that this undervaluation wouldn’t last long, which makes it a particularly “opportunistic time” for Apple to use some of its $133 billion in cash reserves to repurchase shares. Such a move, Icahn says, would elevate the remaining shares to their rightful value.

Icahn has been pressing Apple to return money to shareholders for some time now, and in April, the company did approve $30 billion in share buybacks. Now, he’s urging Apple to “meaningfully accelerate and increase the magnitude of share repurchases.” This show of faith from one of Apple’s largest shareholders also sheds light on how the company’s investors seem to view Apple’s position in the ever-changing and increasingly crowded world of mobile technology. In recent years, some have argued that as these devices become better and better—and therefore, more and more similar—brands matter a lot less. But Icahn rejects that idea altogether, writing that, “the concept of commoditization is nothing more than a myth with regards to Apple.”

In the letter, Icahn attempts to affirm his faith in Apple’s long-term growth, by promising that if Apple heeds his advice, he won’t sell off any of his approximately 53 million shares. In making that promise, Icahn says he hopes to “preemptively diffuse any cynical criticism” that he is merely trying to pump the stock price, before selling his shares off. “We commit to this because we believe Apple remains dramatically undervalued. And we think you and the Board agree,” Icahn writes.

Still, the letter stops short of criticizing Apple or Cook directly. “Quite to the contrary,” Icahn writes, “we could not be more supportive of you and your team, and of the excellent work being done at Apple, a company that continues to change the world through technological innovation.

Icahn calls Cook the “ideal CEO for Apple,” and even goes so far as to say that for consumers, choosing between the new iPhone 6 and Android competitors like the Galaxy S5 and Note 4 is “analogous to the choice between a Volkswagen over a Mercedes at the same price.” Apple, in other words, is the Mercedes.