"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%.