Apple (AAPL) Reclaims $500 On Icahn Remarks
Shares of Apple (AAPL) rallied last week above $500 for the first time since January, after famed activist investor Carl Icahn publicly called the stock "extremely undervalued" after meeting with CEO Tim Cook. On Twitter, Icahn disclosed that he had a "large position" in Apple, which was estimated at $1.5 billion by the Wall Street Journal. The recent rally helped Apple reclaim its top spot as the world's most valuable company by market capitalization. Daily Chart
Icahn suggested that Apple could increase its share buybacks substantially and push the stock back up past $700, an all-time high it hit last September. Apple has already committed to spend $100 billion on share buybacks and a higher quarterly dividend through 2015. Increased anticipation for the company's upcoming release of the iPhone 5S and a lower-end iPhone in September also contributed to the bullish sentiment building behind the stock. Another bullish catalyst was Apple's patent victory over Samsung on August 9, after thee International Trade Commission ruled that Samsung infringed on two Apple patents -- one for its multitouch touchscreen and another one for its headset plug detection. The commission also ruled that Samsung did not infringe on four other patents claimed by Apple. The ruling, part of over a dozen patent litigation lawsuits between the two companies, bans Samsung from importing or selling any of the devices that infringe on the patents -- which currently only includes older devices such as the Galaxy Tab 7 tablet and the Continuum smartphone. However, the broad reaching ruling could hit other Android manufacturers who use the patented technology. Another bullish catalyst on the horizon is a possible deal with China Mobile (CHL
), China's largest wireless carrier. China Mobile has refused to carry the iPhone due to Apple's steep purchase commitment agreements -- which require wireless carriers, like Verizon (VZ
) and AT&T (T
) , to promise to sell a quota of iPhones or buy back the difference. Verizon recently found itself in that trap, possibly owing Apple $14 billion for unsold iPhones due to the rising popularity of Android handsets. However, analysts expect Apple to back down and either lower or eliminate the purchase commitment agreements in order to finally tap into the lucrative Chinese market. Analysts believe that it is a critical time for Apple to strike a deal with China Mobile, since the government is set to hand out 4G licenses to the country's carriers. The iPhone 5S is expected to be optimized for 4G networks worldwide. Although Apple appears fundamentally undervalued, trading at 12 times forward earnings with a 5-year PEG ratio of 0.7, many investors are concerned that the company's product pipeline will dry up soon, and that it does not have true successors to the iPhone and iPad, which make up roughly 75% of the company's top line. Other News About AAPL iPhone 5S In Gold, How Will It Look?
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Published on Aug 19, 2013
By Leo Sun