Billionaire investor and activist Carl Icahn sent an open letter to Apple chief executive Tim Cook on Thursday pushing the company to repurchase more stocks to save itself from the massive undervaluation.
The company stock closed at $100.80 on Wednesday instead of $203 which should be its real valuation. Icahn believes that the company value is significantly low because the market "misunderstands and dramatically undervalues." Apple should be able to repurchase because of its $133 billion net cash. He also forecasted that the company shares will grow by 44 percent by 2015, the Wall Street Journal reported.
"The more shares repurchased now, the more each remaining shareholder will benefit from that earnings growth," Icahn wrote.
The company has been repurchasing for the past two years. The company has spent $74 billion since then and might increase it to $130 billion by 2015.
Icahn is one of Apple's top 10 investors and owns 53 million of its shares. He has been pushing the company to repurchase shares and raise its dividend. He also anticipated that the Apple iWatch and the upcoming Apple TV could also boost the earnings of the company, according to Reuters.
But, not all analysts agree with Icahn's prediction such as the 72.5 million units that Apple could sell for its smartwatch.
"Icahn has laid it all out, and it would be easy to see how it works," Colin Gillis, an analyst at BGC Partners, told USA Today. "But he makes many assumptions that may not come true. In the tech landscape, trends can shift relatively quickly."
Apple is not known for making quick decisions under pressure. Spokesperson Kristin Huguet refused to comment about the letter, but thanked Icahn for the recommendation.
"We always appreciate hearing from our shareholders. Since 2013 we've been aggressively executing the largest capital return program in corporate history. As we've said before, we will review the program annually and take into account the input from all of our shareholders," she said.
