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Who’s Right on Apple Stock — Larry Ellison or Carl Icahn?

Apple (AAPL) made it back above $500 for the first time in forever.

Well, actually, Apple stock made it back above $500 for the first time since January, but it sure seems like forever.

You get the idea. Everyone hated Apple stock, and now some folks are coming back around — particularly Carl Icahn, who just made a big fuss about buying a “large position” in AAPL.

But not everyone is a bull on Apple stock.

In a recent interview, Oracle (ORCL) CEO Larry Ellison thumbed his nose at current Apple CEO Tim Cook when he said AAPL wouldn’t be “nearly as successful” without the late, great Steve Jobs and that history will repeat itself based on the dark days of Apple when it went without its iconic leader during the early 1990s.

For those who don’t remember, Apple seriously was at risk of disappearing back then … not a happy analogy for Cook or Apple stock holders.

So who is right? Is Apple stock doomed amid tough competition from smartphones and tablets running Google (GOOG) Android? Will it become a dead-money tech stock like Microsoft (MSFT) that simply drifts sideways and relies on its buybacks and dividends?

Actually, there’s no reason they both can’t be right. I don’t pretend to believe there is another Steve Jobs or another game-changing gadget like the iPad or iPhone coming down the pike — so point, Ellison. But Carl Icahn isn’t buying because of breakneck growth, simply the valuation and cash hoard — so point, Icahn.

Investors must remember this. The idea of Apple stock as a growth darling that can do no wrong must be removed from Wall Street’s psyche. But as a value play right now, based on stability and cash, Apple stock is a compelling investment.

The numbers for Apple stock are just too powerful. Consider:

  • $146.6 billion in cash and long-term investments
  • Based on earnings estimates of $42.35 for FY2014, the forward P/E is less than 11
  • Back out the cash ($161.37 per share based on 908.44 million shares) and the forward P/E is about 7.1
  • Annual operating cash flow of over $50 billion
  • Revenue per employee of $2.2 million
  • $100 billion earmarked for dividends and buybacks through 2015

Sure, there are risks for Apple stock. But when you look at the actual numbers, it is very difficult to argue that Apple is a risky investment. Shares may gyrate around based on some theoretical notions of innovation, disruption or investor sentiment… but at the end of the day, the numbers give Apple a firm foundation in any market.

I side with Carl Icahn on Apple stock.

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Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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