Carl Icahn: Shares Of Apple Now Worth $240 Per Share

Legendary investor Carl Icahn's bullish stance on Apple Inc. AAPL has been well known for some time. On Monday, Icahn wrote an open letter to Apple's management team, stating that following the company's "tremendous" success in its most recent earnings report, shares of Apple are worth $240 per share. According to Icahn, Apple is poised to dominate two new categories (television and automobiles) in the future. These markets have a combined addressable market of $2.2 trillion – a fact that some investors aren't including in their valuation models. To arrive at a $240 price target, Icahn is forecasting Apple's fiscal 2016 earnings per share to be $12.00 (excluding net interest income). An 18x multiple on the estimated earnings combined with Apple's $24.44 of net cash per share results in the aggressive price target. Icahn continued that an 18x multiple is a "very conservative" premium to the overall market. "Considering the massive scope of its growth opportunities and track record of dominating new categories, we actually think 18x will ultimately prove to be too conservative, especially since we view the market in general as having much lower growth prospects," Icahn wrote in his letter. Icahn also pointed out that shares of Apple are already trading at a "significantly" discounted multiple of only 10.9x, compared to the 17.4x for the S&P 500, implying the index is trading at a 60 percent premium valuation to Apple. Finally, Icahn suggested that shares of Apple are poised to undergo a "de facto" short squeeze as underweight actively managed mutual funds and hedge funds "correct" their misguided positions.