Buy Apple Before Next Buyback Blasts It to $800

NEW YORK (TheStreet) -- I'm not going to bore you with another Apple (AAPL) article paying tribute to the great company. Our praise is meaningless.

With 51 million iPhones sold in the most recent quarter, iDevices are everywhere. By contrast, BlackBerry (BBRY) sold 3.4 million. And when it comes to tablets, Apple is the only one making any money. The company has amassed $160 billion and cash. But everyone volunteers their opinion of how CEO Tim Cook should spend it. Heck, even without Apple's cash the stock would still be valued over $500.

So it's a little surprising that Apple's stock looks as cheap as it does. When Carl Icahn used the term "no-brainer" to describe Apple stock, he wasn't just blowing smoke. Tim Cook listened, and announced several weeks later that Apple had repurchased $14 billion of its stock.

After Apple stock dropped 8% on the company's January quarter earnings report, Tim Cook told The Wall Street Journal that said he was "surprised" by the decline, saying he wanted to be "aggressive" and "opportunistic." But if my suspicions are correct, Cook is going to have a few more opportunities to spend, and in ways that can only benefit long-term shareholders.

Apple will report fiscal second-quarter earnings this month. If you've watched the patterns that I have, Apple's stock has tended to decline following an earnings release, regardless of whether the absolute numbers are good. Guidance has (according to some) always disappointed. Chances are, they may "disappoint" again.

But after each plummet, the shares have bounced back, including a rise from $398 to Wednesday's close of $542.55. Tim Cook has remained aggressive with is share buybacks and dividends. Despite criticism, Cook has owned up to his promise of returning cash to shareholders.

Apple is in the midst of a $60-billion buyback that it recently extended through 2015. But in February, Cook said Apple has repurchased more than $40 billion shares in the last 12 months. During that span, the stock has soared 41%. My scorecard says Apple has $20 billion more shares to buy, and has less than a year to do it.

A couple of months ago, Cook felt the need to accelerate Apple's existing buyback plan, while showing no fear about buying on the open market. I have not had any conversations with him. But investors should expect continued aggressiveness from Cook in the next 30 days, which should drive Apple shares higher.

It's not just about accelerating the buyback plan. I expect Apple to raise the dividend and double the buyback program to $120 billion. With $160 billion on the balance sheet and $53 billion in operating cash flow, financing will be no issue. With the cash earning next-to-nothing on the sidelines, Cook has no choice but to place the bet on his own company.

Assuming the dividend (currently 2.3%) is raised by 1%, Apple will immediately be seen as shareholder friendly. Institutions will return like bees to honey. It wouldn't be beyond the realm of possibility for Apple's stock to then appreciate 50% in the next twelve months.

From current levels, this projects fair value right around $800 a share, to say nothing about potential revenue growth from China Mobile's (CHL) 770 million subscribers. Apple has yet to quantify the impact of China Mobile sales for one full quarter. We will find out soon enough.

As it stands, Apple's stock seems the surest of sure things.

At the time of publication, the author was long AAPL and held no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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