This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Icahn Effect: Is Apple the Next Netflix?

CHARLOTTE, N.C. ( Stockpickr) -- On Aug. 13, the share price of Apple ( AAPL) had been hammering relentlessly for two hours at the immovable $475 resistance level when, at 2:21 p.m., Carl Icahn tweeted: "We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come."

What happened next -- the instantaneous result of this tweet -- is very dramatically represented in the chart below and is being referred to by many as the "Icahn Effect." People like to point at the past year's amazing run-up of Netflix's ( NFLX) stock price as a prime example of this so-called Icahn Effect. One of the most common questions people are now asking me is: Will Apple's stock price soar the way Netflix ran up after Icahn announced a similar large investment last year?

To best answer that question, we should look at the situation from several different angles, and come up with several possible scenarios, based on several different metrics.

>>4 Big Tech Stocks on Traders' Radars

For example: After Icahn announced his big investment in NFLX, the stock soared in nine months to trade at a forward P/E of 80. If Apple's stock rises to trade at a forward P/E of 80, the share-price of AAPL will be $3,400. Not gonna happen.

After Icahn announced his big investment in NFLX, the stock price quadrupled in nine months. If Apple's stock experiences a similar quadrupling, in nine months AAPL will be trading at $1,900. I don't think so.

>>5 Stocks Warren Buffett Is Buying in 2013

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $124.75 0.00%
NFLX $571.55 0.00%
FB $80.78 0.00%
GOOG $524.05 0.00%
TSLA $206.79 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs