Apple (AAPL) Could Be Big Winner from Trump's Tax Policy

November 14, 2016 3:07 PM EST
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While Apple's (NASDAQ: AAPL) stock has been having a rough go of it since Donald Trump's election, Bernstein's Toni Sacconaghi sees the iPhone maker as a "big winner" from Mr. Trump's proposed 15% corporate tax policy, although overall tech earnings will be boosted much less than the broader market.

While the Tech sector's prevailing tax rate today only averages ~18-21%, or ~480 to 670 bps lower than the market overall, Apple's Tax rate is 26%. In addition, Apple has $216 billion in overseas cash.

Sacconaghi notes while Apple generates most of its earnings in very low cost foreign jurisdictions, it chooses to accrue taxes on its income statement for a portion (about 50%) of those offshore earnings, "resulting in a relatively high tax rate by tech-company standards (26%) and an unfathomably large foreign cash balance ($216B)."

"The upshot is that Apple will get both a meaningful earnings boost from a potentially lower tax rate, and has the potential to repatriate 37% of its market cap in offshore cash, which is the second highest percentage among the top 25 tech companies," the analyst said.

Shares of Apple are down 2.2% and down 4.6% since Trump was elected President.



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Analyst Comments, Politics

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Donald J. Trump, Sanford C. Bernstein, Earnings, Toni Sacconaghi

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