Apple Inc. (NASDAQ:AAPL) is the largest company in the world by market capitalization, and one of the most popular stocks among Billionaire investors. Six out of eighteen of the biggest and most famous hedge funds tracked by iBillionaire own stakes in the technology company. Since Apple Inc. (NASDAQ:AAPL) announced its new product line including the less expensive iPhone 5C on September 10th, the stock is down -6.83% compared to +0.32% of the Nasdaq.

Apple

The interesting story is that while research departments were updating their models and downgrading Apple Inc. (NASDAQ:AAPL), and frighten investors were selling the stock, billionaires like Carl Icahn were buying.  So, the question is, who should you follow? the research departments from Credit Suisse Group AG (NYSE:CS), Merrill Lynch, Piper Jaffray, UBS AG (NYSE:UBS) or Carl Icahn, David Einhorn, David Tepper?

Carl Icahn – “Apple is one of my best right now”

After Apple’s iPhone announcement, Icahn was on CNBC and said: “We look at the markets and look for no-brainers and I think Apple Inc. (NASDAQ:AAPL) is just a no-brainer.” His analysis is the following: “If Apple’s cash reserves are discounted, Apple has a market capitalization of around $300 billion, with EBITDA at roughly $50 million, generating a return of about 18 %, or 5.6 times earnings. If Apple executes a share buyback of $150 billion, investors would only pay 3 times EBITDA for a 33 % return.”

Carl Icahn was not worried about Apple’s situation and he thinks the tech company would benefit from a big stock buy-out. Icahn pointed out that he was buying more stock at the $465-$467 range. Apple is now Icahn’s third largest holding representing about 7% of his portfolio. On August 13, Carl Icahn announced an investment of $1.5 Billion in Apple, or about 3 million shares at an average cost of $453.

David Einhorn – “Unless operating results are about to head off a cliff, we expect the shares to stage a recovery”

On July 26, 2013, David Einhorn wrote to Greenlight Capital investors the following:

At Quarter end, AAPL’s market capitalization was $372 billion, implying a 9% annual return of capital to shareholders. Sentiment towards the stock is incredible bearish. Early in the quarter, the concern was that AAPL was losing market to Samsung. When Samsung’s latest Galaxy phone failed to impress, rather than re-assess AAPL’s better competitive position, the consensus story shifted to concerns about market saturation of high end phones. Sometimes you just can’t win….Unless operating results are about to head off a cliff, we expect the shares to stage a recovery.

David Einhorn has owned Apple Inc. (NASDAQ:AAPL) since June 2010 and owns 2.4 million shares as of June 2013. AAPL is Einhorn’s top stock representing 17.84% of his portfolio at an average cost of $430.07 and a +9.81% gain up-to-date.

Other Billionaires

Other Billionaires that own stakes in Apple include: Jorge Lemann, David Tepper, George Soros and Leon Cooperman.

Credit Suisse

The firm downgraded Apple Inc. (NASDAQ:AAPL) shares from Outperform to Neutral, and has a $525 price target. Credit Suisse’s downgrade basically says “so much for the low end” and is lowering the firm’s 2014 earnings expectations as a result. Kulbinder Garcha said, “In aggregate, we remain disappointed with Apple’s decision to remain a premium priced smartphone vendor, and this continues to competitively expose the company and limits its TAM and growth. Given a lack of TAM expansion and lower iPhone sales potential, we lower earnings per share by 8% for Fiscal Year 2014 and downgrade to Neutral.”

Merrill Lynch

What really stands out in the Merrill Lynch downgrade is that it seems to be more of a sentiment shift rather than a mathematical shift. The Merrill Lynch team maintained its $520 price target, and it issued no changes to the earnings estimates of $44.85 per share in 2014 and $51.00 per share in 2015. The research team led by Scott Craig and Samuel Park, said: “We downgrade to Neutral on (1) lack of a “lower-end” iPhone and price points that will be too high to increase penetration in emerging markets (2) no China Mobile agreement, (3) a likely less than expected impact from China Mobile, when/if a partnership is announced — higher than expected pricing, no lower-end iPhone, (4) another “evolutionary but not revolutionary” iPhone product launch, and (5) risk to near term gross margin estimates, given typical lower gross margin on new iPhones (in this case both 5C and 5S, as opposed to only one new launch). On a positive note, the company did add NTT DOCOMO.”

Different Processes. Different Valuations.

As you can see, the banks and Billionaires have different processes of valuing the same company. Billionaires seem to value Apple Inc. (NASDAQ:AAPL) based on the current state of company, looking at cash reserves and price to earning multiples. Banks, however, are valuing the company based on future projections.

The different processes also give different valuations. Billionaires like Icahn and Einhorn have been buying shares of Apple at a range of $430-$470 and have a target of $625, (a 30% increase from today’s price) while banks have lowered their estimates to $525 or less.

I choose to follow Icahn and Einhorn. What about you?

Editor’s note: Raul Moreno is the co-founder of iBillionaire, a mobile application that tracks the portfolios of financial Billionaires. Before co-founding iBillionaire Mr. Moreno was a financial Analyst at GFG Capital, a wealth management firm with assets under management of +$1 Billion, and has degree in Finance and International Business from NYU.