Icahn sees opportunities for Apple in TVs. wearables, payments


"Given the degree to which Apple (AAPL +0.9%) appears undervalued to us, we almost feel that it’s a waste of time to debate the point," says Carl Icahn in a letter outlining his bullish stance on the tech giant.

Icahn trumpets Apple's remaining smartphone/tablet growth potential, and considers pricing/margin concerns unjustified given Apple's strong customer loyalty. He also sees major growth opportunities in the TV, wearable, and payments markets.

Icahn estimates Apple could produce $40B/year in revenue and $15B/year in op. income if its sold 25M TV sets/year (compares with an estimated 2012 market of 238M units) at a $1,600 ASP, and achieved its current company-wide gross margin of 37.7% (well above traditional TV industry margins).

In addition, he views Apple's 575M+ credit card numbers (courtesy of iTunes), fingerprint sensors, and iBeacon mobile positioning platform translating into a huge mobile payments opportunity.

Naturally, Icahn uses his bullish view of Apple's earnings power to argue the company shouldn't be scared to buy back more stock. He doubts Apple needs a major cash hoard for acquisitions, given its conservative M&A track record, and notes it can still raise cheap debt: The company's 5-year bonds yield just 2%, and its 10-year bonds 3.63%.

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Comments (20)
  • carlos marulanda
    , contributor
    Comments (3) | Send Message
     
    Icahn is RIGHT: AAPL the most over-capitalized stock in history. $150 billion earning next to nothing. GOOD GRIEF !!!
    23 Jan 2014, 07:34 PM Reply Like
  • Liquid Crystal
    , contributor
    Comments (306) | Send Message
     
    Aren't they buying back $60 Billion worth of stock? What else do you want? $AAPL
    23 Jan 2014, 07:52 PM Reply Like
  • eieio
    , contributor
    Comments (85) | Send Message
     
    How cam Icahn estimate … "$40B/year in revenue and $15B/year in op. income if its sold 25M TV sets/year (compares with an estimated 2012 market of 238M units) at a $1,600 ASP, and achieved its current company-wide gross margin of 37.7%…"

     

    AAPL haven't even announced this product yet!!!

     

    Aren't Icahns numbers a bit of a stretch??

     

    Using the same logic you could prognosticate on how much money AAPL would make if it went into the sneaker business. Logoed sneakers sold at every Apple store!!!… LOL
    23 Jan 2014, 08:02 PM Reply Like
  • Bill Maurer
    , contributor
    Comments (7280) | Send Message
     
    Yes, those are expensive TVs compared to the bulk of the TV business, substantially higher margins, and his operating income assumes almost no extra operating expenses.
    23 Jan 2014, 08:19 PM Reply Like
  • diaboliqueguan
    , contributor
    Comments (855) | Send Message
     
    is there something he knows that you dont yet?
    24 Jan 2014, 03:32 AM Reply Like
  • bux4seekalpha
    , contributor
    Comments (25) | Send Message
     
    He's baaack! And, although I'll take the outcome of the repurchase gladly, I'd much prefer a 15-20% bump in the dividend.
    23 Jan 2014, 08:08 PM Reply Like
  • kato4321
    , contributor
    Comments (87) | Send Message
     
    Apple needs a new financial team if those billions aren't invested in something! Very hard to tell what a firm is really doing unless you can get a good look at their tax records. Even then, a lot of accounting games are possible.

     

    I am a firm believer if Apple management were really dummies, they would not be working at Apple , but would have high level Federal Gov. Jobs.
    23 Jan 2014, 08:28 PM Reply Like
  • Ricardo 81
    , contributor
    Comments (40) | Send Message
     
    i think this will be the year of apple because of the new products and the iphone 6! i think apple will reach 800 by the end of the year im just sorry i dont have more money to by more stocks
    23 Jan 2014, 08:30 PM Reply Like
  • BNR VA
    , contributor
    Comments (11) | Send Message
     
    Vizio has been making flat screen tv for the last 10 years. They sell 6 million per year and they are the US leader. Apple is going to sell 25M? Vizio did $2.9B in sales last year. Apple shoulh buy VIZIO or Sony. The China model requires one 60 inch TVs in every affluent house.
    23 Jan 2014, 08:32 PM Reply Like
  • BNR VA
    , contributor
    Comments (11) | Send Message
     
    Vizio has been making flat screen tv for the last 10 years. They sell 6 million per year and they are the US leader. Apple is going to sell 25M? Vizio did $2.9B in sales last year. Apple shoulh buy VIZIO or Sony. The China model requires one 60 inch TVs in every affluent house.
    GO With Strength- TV?
    23 Jan 2014, 08:32 PM Reply Like
  • justhinkin01
    , contributor
    Comments (8) | Send Message
     
    God I love my country! Free speech and all. It is like having two CEO's working at the same company. I hope Mr. Cook is listening. It all sounds good to me......Long Apple..............
    23 Jan 2014, 08:34 PM Reply Like
  • User 15536532
    , contributor
    Comments (96) | Send Message
     
    I agree with Kato4 - The Apple management most likely has a plan for all of that cash - acquisitions, increased dividends, new product development, and/or buying back shares when they see a significant enough price drop.

     

    They know their business environment and are holding on to the cash for a reason. Icahn wants them to load up with debt so HE can pull more money out of the business. At such low interest rates, it might be a win/win for everyone, but it's all speculative.

     

    As far as a TV or wearable Apple watch...... Boring. I would not wear an Apple watch. Thanks to smartphones, almost nobody wears a watch, period. Apple TV probably doesn't make sense either unless they were to purchase Sony or Vizio, then expand or enhance those lines.

     

    Apple will probably do great things, but we will all have to wait to see how it develops.

     

    I hold no positions in AAPL but will most likely initiate a Long position if the stock price dips back into the 3xx range.
    23 Jan 2014, 08:44 PM Reply Like
  • Bill Maurer
    , contributor
    Comments (7280) | Send Message
     
    Most of the cash is outside the US - can't be used for dividends and buybacks unless they borrow against it or repatriate. Could make a foreign acquisition a la MSFT/NOK.
    23 Jan 2014, 08:48 PM Reply Like
  • NWCats404
    , contributor
    Comments (348) | Send Message
     
    This isn't exactly in their DNA, but I like the idea. They are also paying for a lot of their production costs to companies such as Foxconn, from foreign cash, are they not? Do you think any of this 'made in the USA' push relates to lobbying efforts at reducing repatriation costs?
    24 Jan 2014, 03:32 PM Reply Like
  • justhinkin01
    , contributor
    Comments (8) | Send Message
     
    Jackpot Alert: Tonight's Powerball is $131 million! I'd bet on Mr Icahn instead.
    23 Jan 2014, 09:31 PM Reply Like
  • kimboslice
    , contributor
    Comments (1797) | Send Message
     
    I don't care what iCahn says but I'm glad he shares my opinion about Apple's future stock value.
    23 Jan 2014, 10:56 PM Reply Like
  • 2puttwo
    , contributor
    Comments (656) | Send Message
     
    Eieio, or should I call you Mac. Icahn probably has a staff of 80, working on at least four continents, turning over every rock they can fine. If you invested over $3 billion in one company wouldn't you?
    24 Jan 2014, 12:57 AM Reply Like
  • pman6
    , contributor
    Comments (270) | Send Message
     
    now hurry the fug up and get to $600.
    damn thing is stuck around 550 too long
    24 Jan 2014, 06:38 AM Reply Like
  • tomEmaz
    , contributor
    Comments (8) | Send Message
     
    Why does the iWearable have to look like an iWatch, it could be a iPendant adorned around your neck tucked into a shirt or blouse. Or maybe a iButton size pin holding a neck tie. Even a wearable iBracelet that speaks siri or digital display that is monetary enabled and readable to make purchase or endless possibilities especially with one of their newest designer member to the iTeam. Have you spoke to anybody who just returned from Di$ney?? They can determine if they are lost or heaven forbid mislead away from their group
    26 Jan 2014, 03:15 AM Reply Like
  • LDweck
    , contributor
    Comments (26) | Send Message
     
    OUFF just when I was hoping for another bargain basement purchase of Apple ICHAN spoils it with over-exuberance. He should have waited a lot longer for those simpletons, who do not see, great value, prospects, and a mountain of cash as very desireable and safe, do all the daft selling their little hearts desire.
    28 Jan 2014, 09:08 PM Reply Like
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