Why Carl Icahn Feels Apple Would Be Undervalued Even At $200 A Share

Chairman of Icahn Enterprises LP IEP Carl Icahn was recently on CNBC to talk about performance of Tim Cook as CEO of Apple Inc. AAPL and how a short squeeze is taking place in stock of Apple.

Related Link: Carl Icahn: Apple Guidance Revision A Distinct Possibility

Tim Cook Supporter

Icahn began, “We think very, very highly of Tim [Cook] and in fact, I was one of his early supporters when there was criticism of him [a] year and a half ago or whenever.”

“I think he has done a magnificent job and the only criticism we have -- if there is, if you call it that -- is the fact that they don’t do a bigger buyback.”

“This company invests more in research and development than any other company in world’s history, and it still has $178 billion. The real issue that I think is overlooked completely is that this company is going at 9 times earnings. Now, this is almost laughable.”

Mutual Funds Playing Catch Up

“I think you have an ad hoc short squeeze that will occur and it is occurring now in Apple, because today you have to just look at what is interesting here: [...] the index funds are in competition with the regular mutual funds,”Icahn said.

“So, a mutual fund has to do better than an income fund, because you are paying them three times as much; you pay them 1-1.5 percent. An index fund is 33 basis points; so they have to do better than the indices.”

He continued, “Indices have Apple in them, and so therefore, I think a lot of these funds have to catch up and will have to play catch up with Apple, because Apple is 5 percent meaningful part of the fund’s performance and when that starts, I think this stock can well go.”

“We put a number on it of $200, which will bring it even then into a multiple that is much below the multiples of the S&P.”