There’s a reason why people listen when Carl Icahn talks (even if they disagree). In fact, CNBC worked out the heavyweight investor has made $581,793 (£406,024) on average for every single day he’s been alive (he just turned 80). So his recent decision to shed some seven million Apple shares has unsurprisingly stirred up considerable interest.
After all, this was the investor repeatedly bemused at how cheap the stock seemed. ‘I think Apple is still ridiculously underpriced,’ he said back in September. An open letter to Tim Cook in May held a similar sentiment.
It gushed that institutional investors, Wall Street analysts and the media alike hadn’t considered a range of factors – ‘...fail to value Apple’s net cash separately from its business, fail to adjust earnings to reflect Apple’s real cash tax rate, fail to recognise the growth prospects of Apple entering new categories...’ As a result he said these ‘failures’ had caused ‘Apple’s earnings multiple to stay irrationally discounted’.
Seven million shares (worth around $750m) might seem like a considerable chunk, but it’s still only 14% of Icahn's holding in Apple. Those hailing the tech giant’s downfall may want to calm down a little. But it also comes as another big investor, Greenlight Capital’s David Einhorn, revealed he’d dumped 44% of his holding in the fourth quarter too.
Both these sell-offs were done in the last three months of 2015 – just before the firm’s shares started to droop this year due to growing concern over the saturation of the smartphone market and whether China would still drive sales growth.
Apple is grappling with the impossibility of continually living up to its sky-high standards. It lost its title as the world’s most valuable listed company to Google’s parent firm Alphabet earlier this month and in January CEO Tim Cook said Apple would have its first sales drop for more than a decade. It’s predicted that revenue in the first three months of the year will be $50bn-$53bn, below analysts’ estimates for $55.5bn.
Its prospects are still pretty good though and there’s a risk when discussing a firm of Apple’s success that the rare dips are exaggerated and raked over more than perhaps they should be. It’s a hugely profitable company (generating a record $18.4bn in net income on sales of $75.9bn in the quarter to December) and Icahn, as well as other investors, is more than aware of its value.
But, Cook also knows that his firm's diversification needs to be more successful. Sales of iPads and Macs have floundered somewhat and though Apple hasn't released official figures, it doesn't seem as if the Apple Watch has stirred up as much interest as Cook would've liked.
The iPhone 7 should bring a boost to Apple when it’s launched later this year, but with the strength of its core product weakening a little, it can’t just call on smartphone sales to continue its trajectory as it has done until now.