One tweet from Carl Icahn saw the market value of Apple Inc. increase more than $8 billion on a single day.
A letter addressed to Apple Inc. (NASDAQ: AAPL) Chief Executive Tim Cook was made public by Icahn through Twitter on Monday, a couple of minutes after 11am EST. Carl Icahn said that he believes that now the tech giants stock is worth $240, totaling an 84% jump from where the stock ended on Monday.
A few pennies down, the stock was trading at about $128.74 at 11am. The stock then went on to close at $130.19, 1.1% up on Monday. The impact was around $8.35 billion increase in the company’s market capitalization since the tweet took place, according to FactSet data.
Icahn Associates, which is Carl Icahn’s hedge fund saw its investment value grow by $76.5 million in a single day since the tweet. Icahn Associates which holds 52.8 million shares, is Apple’s seventh biggest shareholder. Icahn has made a total of $303.9 million on his investment in Apple since the 31st March.
Icahn explained that his $240 per share valuation came from estimating fiscal 2016 EPS (earnings per share) of $12, then he applied an 18 times price-to-earnings multiple and lastly added a net cash per share of $24.44.
The current consensus EPS estimates from FactSet for fiscal 2016 is $9.98 and the P/E ratio for Apple is 16.1, compared to an 18.6 P/E ratio for the S&P 500.
Icahn further added that Apple are positioned in a way for next year to enter and dominate the new TV market, and further then dominate the automobile market by 2020, which have an addressable market of around $2.2 trillion combined.
Icahn expressed that he’s pleased with Apple’s share buyback program of $80 billion and appreciates that this is now further increased by $50 billion, however, he said he believes the difference between current and future stock value and considering that it continues to grow the company’s massive cash position, indicates that it is time for a much bigger buyback.
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