Icahn: Short squeeze is driving Apple stock higher

A short squeeze is driving Apple (AAPL) stock higher after the company's record quarterly earnings performance reported on Tuesday, activist investor Carl Icahn said on Wednesday.

"I think you have an ad hoc short squeeze that has occurred and is occurring now in Apple," Icahn told CNBC's "Fast Money: Halftime Report." Apple shares rose more than 7 percent into Wednesday afternoon after the tech giant on Tuesday easily beat Wall Street expectations on record quarterly earnings and revenue. Better-than-expected iPhone sales and strong growth in China helped push the monster quarter. The company also announced it would ship its wearable Apple Watches in April.

Read More Why Apple stock is still cheap: Analyst Despite a potential short squeeze, Apple's true value remains much higher than its current price, Icahn argued. He said he is "very pleased" with the company's results and continues to recommend the stock.

In October, Icahn asked Apple to make a tender offer for shares on the belief that the tech giant is undervalued. Icahn wrote in a letter to the company that his models value Apple at $203 per share-more than double its current price around $100. Taking into account Apple's earnings and multiples, shares are undervalued and could shoot even higher than the earlier price target, Icahn said.

"If anything, I guess we're going to revise our guidance," Icahn said.

Read More Blowout: Apple crushes Wall St estimates