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Listen to Icahn, Apple's a No-Brainer Buy

Richard Saintvilus

NEW YORK ( TheStreet) -- In Wall Street's quarter-to-quarter obsession with growth, it's not surprising that analysts continue to take a wait-and-see attitude when it comes to Apple .

Despite how cheap Carl Icahn believes shares of Apple are, institutions don't share the same opinion. If they do, they're demanding more proof that Apple is indeed the no-brainer investment Icahn claims.

[Read: Here's Why Apple's Shares May Soon Soar]

There are no shortages of opinion about what ails Apple. The company is coming off a quarter where it sold 51 million iPhones (a company record) while analysts are busy dissecting what Apple must do to avert death. By contrast, BlackBerry sells less than 2 million devices and everyone's applauding its revival. It's absurd.

Everyone is chiming in about what CEO Tim Cook should/must do to resuscitate Apple's growth. It's as if Cook doesn't already have an idea.

Yes, the competition from Samsung and Google has caught up to Apple in smartphones and tablets. But these critics are quick to forget some simple rules.

First, mobile devices become a commodity sooner or later. When this happens, the devices get hit hard with weak average selling prices. This is especially true to those on the high-end, the market in which Apple operates. In some respect, low ASPs have also hurt Samsung and even budget-friendly devices from Lenovo .

As far as many analysts were concerned, these headwinds were material to Apple and no one else. By focusing on Apple's perceived deficits, with no counter glance at the company's future, The Street is sometimes convinced that Apple's run is over.

But the company that's going to survive is the one that can design, build and deliver products to customers at the most appealing cost structures. Who besides Apple has been able to perfect these qualities? Barclay's analyst Ben Reitzes disagrees.

A couple of weeks ago, Reitzes downgraded shares of Apple to equal weight even though he maintained his price target of $570. What was the point? He might as well have said sell. That's the way the Street read it. And that's what investors did.

[Read: How to Invest in Apple, Google and Intel]

The stock would lose more than 4% in the days that followed. It seems in the midst of all of the hype surrounding Tesla and other growth behemoths, Reitzes, a well-known Apple bull, had lost faith. Many others followed.

I'm not claiming that this is the same Apple that posted insane margins three years ago. But Apple was never the value trap Reitzes made it out to be. What Apple bears can't understand is that there's a meaningful difference between Apple's stock and the company's actual performance.

Cook hasn't been a flawless in his execution. But he's not in the category of any of BlackBerry's deposed CEOs, either. And why is it that margin compression only matters to Apple? The Street will regularly and conveniently overlook Amazon's weak margins.

Several paragraphs above, I cited Apple's 51 million iPhone sales for its January quarter. If competition from Samsung and Google was truly intensified, how was it possible that Apple could have achieved such a record quarter?

The answer is simple; consumers are willing to pay a premium for a distinguishable device. They value a product that stands out from the rest. The popularity of the gold-colored iPhone 5S was the perfect example. Consumers want differentiation. This is how Apple plans to grow market share. And it can do this without dropping its prices.

Margin fears are going to take care of themselves. And once the company is fully entrenched in the high-margin mobile payments realm, analysts like Reitzes are going to pay for having discounted Apple's growth potential.

For now, with the stock trading at just 13-times earnings, I have to agree with Icahn. Apple is a no-brainer. Especially given that the company is buying back billions worth in stock and pays a 2.3% yield. On the basis of long-term free-cash-flow growth these shares are worth (at minimum) $650 by the end of the year.

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

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

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