(Reuters) - Hedge fund billionaire Carl Icahn took a "large" position in Apple Inc. <AAPL.O> shares and told Reuters on Tuesday that he believes Apple should trade at $700 a share.
In a telephone interview, Icahn said he believes "Apple has the ability to do a $150 billion buyback now by borrowing funds at 3 percent.
"If Apple does this now and earnings increase at only 10 percent, the stock - even keeping the same multiple currently - should trade at $700 a share."
Apple shares were at $489.57 on Tuesday.
Apple has "huge borrowing power, little relative debt and trades at a low multiple," Icahn said.
Earlier on Tuesday, Icahn stunned markets after he sent a tweet, saying: "We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come."
He also tweeted: "Had a nice conversation with Tim Cook today. Discussed my opinion that a larger buyback should be done now. We plan to speak again shortly."
(Reporting By Jennifer Ablan; Editing by Andrew Hay and Ken Wills)