Tim Cook’s floor price for Apple stock

Interesting analysis from Seeking Alpha (free reg-wall) makes the case that Tim Cook has just set a floor (albeit temporary) for the price of Apple stock with the recent Apple buyback and Carl Icahn’s reversal of his pursuit of a much larger buyback.

The news of Apple actually staying true to its word by making the buy-back truly opportunistic and not just a blind buy-back like so many other companies is a clear sign that the company truly believes in its products, valuation and future growth. Additionally, it puts a new temporary floor in the price of the stock. Since $500 is where the company views itself as being cheap, that is now where the Street will view it to also be cheap. Since this announcement, the stock has hence shot back up into the $535 range.

This type of move on the company’s part is brilliant, in my opinion. It reminds me back in 2011, when Warren Buffett did something similar on his own Berkshire Hathaway (BRK.A) (BRK.B) shares stating that the current price (then 110% of book value) was undervalued and he intended to buy them back. Similar to what just happened to Apple’s stock, Berkshire shares after that announcement almost immediately shot up in price and a new floor had been created.



  • matthewmaurice

    The real story here is that for all the trash-talk from Apple-haters about iSheep, the real sheep are the alleged “wolfs” on Wall Street. “Since $500 is where the company views itself as being cheap, that is now where the Street will view it to also be cheap.” Wow, you spent $100K for an Ivy League MBA for THAT?! Frickin’ traders. [smh]