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How Carl Icahn figures Apple is worth $203 per share

Fom Icahn's Stockholders' Square TableFom Icahn's Stockholders' Square Table
Fom Icahn's Stockholders' Square Table

You have to wade through thick paragraphs of wheedling, flattery, product assessment and unabashed self-aggrandizement to get there, but buried in Carl Icahn’s rambling 4,200-word “letter to Tim Cook” is his justification for the highest Apple price target on Wall Street — nearly twice the current consensus.

His argument takes some wild leaps — he likes to compare P/Es in the hand with P/Es in the bush — but the math is there for anyone to see: (I quote)

  • Apple, adjusting for net cash, currently sells at a P/E (price to earnings per share ratio) of only 8x our FY 2015 forecast, a significantly lower P/E than a broad market index, the S&P 500, which trades today at a P/E of 15x FY 2015 consensus.
  • In contrast to the S&P 500’s slower growth, we expect Apple to grow its EPS by 30% in each of FY 2016 and FY 2017.
  • Our forecasted growth for FY 2016 and FY 2017 more than adequately justifies using a P/E multiple of 19x our FY 2015 forecast, which along with net cash values Apple at $203 per share today.

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The literary device of a “letter” to Cook breaks down pretty quickly. Apple’s CEO doesn’t need to be told how great Apple’s products are. Or how “flawed and fragmented” Google’s Android.

What also breaks down is the logic of his pitch to Apple’s board of directors for a massive tender offer to repurchase shares.

According to Icahn, self interest will soon force mutual funds to pour money back into Apple. But if that’s inevitable, why would the company need to enlarge what is already the largest share buyback in the history of capitalism?

No, this isn’t a letter to Tim Cook at all. It’s a letter to investors, telling them to buy Apple before it’s too late.

And taking credit in advance for any gains in Apple’s stock price.

See: Shareholders’s Square Table, Sale: Apple shares at half price.

Follow Philip Elmer-DeWitt on Twitter at @philiped. Read his Apple (AAPL) coverage at fortune.com/ped or subscribe via his RSS feed.