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 With Apple's stock market value ballooning this week beyond $700
billion, larger than Switzerland's gross domestic product, activist
investor Icahn said the technology company's shares should be
trading at $216 apiece, equivalent to a market capitalization of
about $1.26 trillion.
Icahn's opinion implies an increase of about 70 percent from
Thursday's closing price of Apple's stock. And that's on top of a 65
percent surge in Apple's shares over the past 12 months, which
dwarfed the S&P 500's 15 percent return.
“It wouldn't be outlandish for them to be at a $1 trillion market
cap now,” said Mark Mulholland, a portfolio manager whose Matthew 25
fund is among the best performing large-cap funds over the last five
years.
But like other portfolio managers consulted by Reuters, Mulholland
believes it will more likely take two or three years to reach that
level.
Fortunes wax and wane in the technology industry seemingly
overnight; Apple teetered on the edge of financial ruin in the late
1990s and more recently it was partly to blame for the rapid demise
of once-storied brands like Nokia and BlackBerry.
Maintaining its spot at the top of the global technology market and
growing its now-record market value hinges in part on Chief
Executive Tim Cook's ability to keep up the stream of game-changing
consumer products launched by cofounder Steve Jobs.
Still, Wall Street appears sanguine in the short term.
After Apple trampled Wall Street's expectations for quarterly
earnings in January with record iPhone sales, stock market analysts
increased their 12-month stock price targets. Their median average
target price is now $134, which is a mere 6 percent higher than
Thursday's price and much less than what Icahn says it should be.
Icahn, one of Apple's ten largest shareholders, said in his letter
to Twitter followers on Wednesday that investors significantly
undervalued the company and that he hoped the board would increase
its share buybacks.
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Apple's stock closed 1.26 percent higher at $126.46 on Thursday,
bringing its market capitalization to a dizzying $736.6 billion.
“The iPhone still has legs, but they have to keep innovating. There
have to be new product categories,” said Tim Ghriskey, chief
investment officer of Solaris Group in Bedford Hills, New York.
But even with a crop of new gadgets, Apple's earnings and share
price will probably increase only modestly faster than other
companies in the S&P 500 over the next four years, Ghriskey
believes.
The Apple Watch, due out in April, and the Apple Pay mobile payments
system may eventually propel stock gains, but it will take time for
them to become serious profit contributors, he and others said.
"Apple Pay seems to be an area that could touch enough consumers to
move the needle but that's going to be a slow process," said Patrick
Becker Jr at Becker Capital Management.
(Additional reporting by David Randall in New York; editing by
Andrew Hay)
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