(To get an idea of what Icahn means by "no brainer," he listed some of his other investments also touted to be "no brainers," which include "Netflix, Hain Celestial, Chesapeake, Forest Labs and Herbalife, just to name a few." However, he also said the same thing about spinning off PayPal amid eBay's earnings report on Wednesday.)
Icahn also repeated his belief that Apple stock is "undervalued," turning things up a notch by lambasting how "ridiculous it seems to us for Apple to horde [sic] so much cash rather than repurchase stock."
Here is Icahn's rationale for the buyback plan, in a nutshell:
The S&P 500’s price to earnings multiple is 71% higher than Apple’s, and if Apple were simply valued at the same multiple, its share price would be $840, which is 52% higher than its current price. This is a dramatic valuation disconnect that simply makes no sense to us, and it seems that the company agrees with us on this point. Tim Cook himself has expressed on more than one occasion that Apple is undervalued, and as the company states, it already has in place “the largest share repurchase authorization in history.” We believe, however, that this share repurchase authorization can and should be even larger, and effectuating that for the benefit of all of the company’s shareholders is the sole intention of our proposal.
Lamenting that Apple's board has gone against his advice, Icahn pointed toward Apple's product portfolio and its long-standing reputation for further evidence:
Even if the story ended with Apple’s existing product and software lines, we would still choose to make Apple our largest investment. But there is more to the story! Tim Cook keeps saying that he expects to introduce “new products in new categories” and yet very few people seem to be listening. We’re not aware of a single Wall Street analyst who includes “new products in new categories” or new services in any of their financial projections, even though Apple clearly has an impressive track record of such new category product introductions, even if it does so rarely. Apple released the iPhone in 2007 and the iPad five years later in 2012, both so extraordinarily successful that today they represent the majority of the company’s revenue. Tim Cook’s comments, along with advancements in enabling technologies, lead us to believe that we may see in the not too distant future what new groundbreaking products they’ve been working on developing in Cupertino these last several years.
Icahn made a splash last year when he announced his firm's "substantial" investment in Apple. That figure became all the more substantial this week as Icahn said he bought $500 million more in Apple shares, bringing his total investment to approximately $3.6 billion.
He followed up in a candid interview with Bloomberg TV in October, arguing that anyone who was not onboard with his buyback proposal must "have not bothered to read the balance sheet or maybe does not know how to read a balance sheet."
Apple has not commented publicly on the matter. The Cupertino, Calif.-based company is scheduled to publish its fiscal first quarter earnings report after the bell on Monday, January 27.
Apple shares were also up slightly in after hours trading.