Apple (AAPL) Unfavorable Tax Ruling is 'Manageable' - RBC
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RBC Capital analyst Amit Daryanani reiterated an Outperform rating and $117 price target on Apple (NASDAQ: AAPL) saying today's tax ruling is "manageable" and sees minimal impact on the company's EU operations.
Daryanani commented, "The European Commission's statement claims AAPL received illegal tax benefits of €13B or $14.5B during the 2003-2014 period. While the investigation that began in 2014 was largely known, the penalty amount was the variable in this case, as prior media reports have stated that the penalty could range anywhere from $1-19B. We think the $14.5B ruling came in worse than expected, however AAPL in addition to Ireland (AAPL's EU subsidiary tax jurisdiction) has confirmed it will appeal today's unfavorable ruling. We note that an appeal process could take years before the issue is finalized. In addition, we highlight that AAPL should have ample capacity to absorb a broad range of negative outcomes with ~$150B in net cash on its balance sheet. Today's negative ruling is similar to other tax investigations conducted by the European Commission on other multi-national companies including McDonald's, Starbucks, Anheuser-Busch InBev, and Amazon among others. Ultimately, we think today's result should have a minimal impact on AAPL's EU operations."
Shares of Apple closed at $106.82 yesterday.
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