US tax reform, if it passes, predicted to drive Apple toward $1 trillion market cap

Posted:
in AAPL Investors
While details on President Trump's proposed tax reform plan remain light, investors are hoping changes could allow Apple to bring some of its overseas cash back to U.S. shores, helping to push the company's stock price to new heights.




Analyst Amit Daryanani of RBC Capital Markets believes that Apple could be one of the largest beneficiaries in America, if the government can pass comprehensive tax reform. Specifically, he sees earnings per share growing by between $4 and $4.50 in fiscal year 2018, pushing the stock closer to a trillion-dollar market cap.

His projections were revealed in a research note to investors this week, a copy of which was provided to AppleInsider.

Taxes have become a new focus for both the president and Congress after failing to pass health care reform. Accordingly, the Trump administration has published a proposed tax framework that could reduce corporate tax rates, allow deductions for capital investments, and lower the repatriation tax rate for offshore cash.

However, the framework remains vague as the proposal comes together, leading Daryanani to draw a number of assumptions regarding limits for deductions, tax rates on foreign profits and more.




For example, he believes tax reform could reduce Apple's effective tax rate to below 20 percent.

He also assumes that the plan might offer a reduced 10 percent tax rate on accumulated foreign profits. That's particularly noteworthy to Apple, as the company had $261.5 billion in cash as of the end of last quarter, with 94 percent of it held overseas.

Daryanani's projections call for Apple to repatriate about $219 billion at a reduced rate, using some of the money for share repurchases while holding a "significant portion" for strategic options.

The analyst noted that "significant uncertainties around corporate tax reform" remain. He also cautioned that "increasingly aggressive actions of E.U. regulators" could largely offset any tax benefits seen through U.S. reform.

But the prospect of tax reform in America, plus the launch of the new iPhone 8 and upcoming iPhone X, have Daryanani remaining bullish on shares of AAPL. RBC has maintained its "outperform" rating on the company's stock, with a price target of $180.

As of Tuesday, Apple currently trades north of $155, with a market capitalization of over $800 billion.
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Comments

  • Reply 1 of 55
    nhughesnhughes Posts: 750editor
    Keeping the comments open on this one. Please keep it civil, or we will wield the banhammer. Thanks.
    badmonkwatto_cobra
  • Reply 2 of 55
    Go Trump!
    SpamSandwichboltsfan17jbdragontallest skil
  • Reply 3 of 55
    rob53rob53 Posts: 1,976member
    I thought part of the "tax reform" proposed by Trump and others was to heavily tax Apple products using import duties. Just bringing back profits isn't going to offset the increase in import duties. 
    Soli
  • Reply 4 of 55
    gatorguygatorguy Posts: 19,811member
    While details on President Trump's proposed tax reform plan remain light, investors are hoping changes could allow Apple to bring some of its overseas cash back to U.S. shores, helping to push the company's stock price to new heights.

    He also assumes that the plan might offer a reduced 10 percent tax rate on accumulated foreign profits. That's particularly noteworthy to Apple, as the company had $261.5 billion in cash as of the end of last quarter, with 94 percent of it held overseas.

    Daryanani's projections call for Apple to repatriate about $219 billion at a reduced rate, using some of the money for share repurchases while holding a "significant portion" for strategic options.
    IMHO not a chance in hell that Apple repatriates $219B to the US even at a 10% tax-rate, and that assumes it doesn't tick up closer to 15% to get holdout legislators on board, or even passes anyway. Apple's effective overseas tax rates are significantly less than that now.

     If I read things correctly Ireland has set up a new special tax rate of 6.5% that companies like Apple, Google and others with intellectual property can take advantage of.

    Then there is Singapore, another strategic country in Apple's tax avoidance strategies. Their standard corporate tax rate is 17 percent but it expects zero for sales generated outside of Singapore. The US will never compete with that. 
    edited October 2017 Solijony0
  • Reply 5 of 55
    Just goes to show how warped the priorities have become in the United States. Corporate profits and the stock market are not struggling and do not need additional help. 
    jeffharristzm41spice-boyfrankieStrangeDaysfastasleep
  • Reply 6 of 55
    tzm41tzm41 Posts: 78member
    Why do I feel the main theme of the "tax reform" is to put heavier burden on the middle class and give more cut to the big corporates? That doesn't seem very good to me.
    jeffharrisfrankieStrangeDaysjony0
  • Reply 7 of 55
    blastdoorblastdoor Posts: 1,888member
    Apple clearly has more money than they need for capital investment or R&D, so any tax cut probably would go directly into dividends or share buybacks. 

    Good for shareholders like me; bad for just about everyone else. 
    jeffharristzm41jony0
  • Reply 8 of 55
    gatorguy said:
    While details on President Trump's proposed tax reform plan remain light, investors are hoping changes could allow Apple to bring some of its overseas cash back to U.S. shores, helping to push the company's stock price to new heights.

    He also assumes that the plan might offer a reduced 10 percent tax rate on accumulated foreign profits. That's particularly noteworthy to Apple, as the company had $261.5 billion in cash as of the end of last quarter, with 94 percent of it held overseas.

    Daryanani's projections call for Apple to repatriate about $219 billion at a reduced rate, using some of the money for share repurchases while holding a "significant portion" for strategic options.
    IMHO not a chance in hell that Apple repatriates $219B to the US even at a 10% tax-rate, and that assumes it doesn't tick up closer to 15% to get holdout legislators on board, or even passes anyway. Apple's effective overseas tax rates are significantly less than that now.

     If I read things correctly Ireland has set up a new special tax rate of 6.5% that companies like Apple, Google and others with intellectual property can take advantage of.

    Then there is Singapore, another strategic country in Apple's tax avoidance strategies. Their standard corporate tax rate is 17 percent but it expects zero for sales generated outside of Singapore. The US will never compete with that. 
    The current rates in Ireland are instead going to result in a huge retroactive penalty for Apple. Surely you are aware of this?
  • Reply 9 of 55
    gatorguygatorguy Posts: 19,811member
    gatorguy said:
    While details on President Trump's proposed tax reform plan remain light, investors are hoping changes could allow Apple to bring some of its overseas cash back to U.S. shores, helping to push the company's stock price to new heights.

    He also assumes that the plan might offer a reduced 10 percent tax rate on accumulated foreign profits. That's particularly noteworthy to Apple, as the company had $261.5 billion in cash as of the end of last quarter, with 94 percent of it held overseas.

    Daryanani's projections call for Apple to repatriate about $219 billion at a reduced rate, using some of the money for share repurchases while holding a "significant portion" for strategic options.
    IMHO not a chance in hell that Apple repatriates $219B to the US even at a 10% tax-rate, and that assumes it doesn't tick up closer to 15% to get holdout legislators on board, or even passes anyway. Apple's effective overseas tax rates are significantly less than that now.

     If I read things correctly Ireland has set up a new special tax rate of 6.5% that companies like Apple, Google and others with intellectual property can take advantage of.

    Then there is Singapore, another strategic country in Apple's tax avoidance strategies. Their standard corporate tax rate is 17 percent but it expects zero for sales generated outside of Singapore. The US will never compete with that. 
    The current rates in Ireland are instead going to result in a huge retroactive penalty for Apple. Surely you are aware of this?
    What penalties? There are none now and none are proposed. 
  • Reply 10 of 55
    tzm41 said:
    Why do I feel the main theme of the "tax reform" is to put heavier burden on the middle class and give more cut to the big corporates? That doesn't seem very good to me.
    What is proposed doesn’t support your feeling. Middle class and small business owners would see large cuts.
    jbdragon
  • Reply 11 of 55

    Just goes to show how warped the priorities have become in the United States. Corporate profits and the stock market are not struggling and do not need additional help. 
    The priorities in the US have changed from concessions to EU demands to prioritization of US citizens. That’s where priorities should be.
  • Reply 12 of 55
    gatorguygatorguy Posts: 19,811member
    tzm41 said:
    Why do I feel the main theme of the "tax reform" is to put heavier burden on the middle class and give more cut to the big corporates? That doesn't seem very good to me.
    What is proposed doesn’t support your feeling. Middle class and small business owners would see large cuts.
    The largest beneficiaries will be big corporations and the top 1% of taxpayers according to an independent analysis, but that's beginning to stray off topic and likely lead to the thread being locked IMHO. I don't think posters here can control themselves enough to civilly discuss that topic. I can PM the paper I'm referring to if you wish.
    bosco08tzm41frankieStrangeDays
  • Reply 13 of 55
    MacProMacPro Posts: 17,888member
    I always said I'd sell my investment (mostly between $30-$70 pre split) once Apple hit the big $T.  But what else would one do with investment money?  The dividends are great, the growth insane.
    jony0
  • Reply 14 of 55
    tzm41 said:
    Why do I feel the main theme of the "tax reform" is to put heavier burden on the middle class and give more cut to the big corporates? That doesn't seem very good to me.
    What is proposed doesn’t support your feeling. Middle class and small business owners would see large cuts.
    Hmmmm .  Where do you get your information?  I'm reading the Tax Policy Center's analysis and in the abstract it states "Those with the very highest incomes would receive the biggest tax cuts. The tax cuts are smaller as a percentage of income in 2027, and taxpayers in the 80th to 95th income percentiles would, on average, experience a tax increase."  And Mnuchin has not said the tax plan would reduce middle class taxes.  Do you know something Mnuchin doesn't?
    tzm41frankieStrangeDays
  • Reply 15 of 55
    foggyhillfoggyhill Posts: 4,767member
    Spam, the whole "middle class" gets a large cut is total BS made to sell that slop. If 90% of the fracking tax cut goes to the top 5%, the whole US gets into a deep hole because how on earth will current services then be serviced?  Then this middle class and the poor gets huge cuts in services which doesn't bother the richest who live in their own little bubble of wealth.

    This is basically the same crap that's been tried in a few US state, like Kansas, leading to quasi disaster.
    This also look a lot like some third world craphole were every public infrastructure is falling apart because none pay for it, and most of the money
    is redirected to the military and large corporation and a few people at the top have all the power and wealth.

    This is not a tax reform, this is the usual "trickle down" bullshit that hasn't worked since 1980, yet keeps coming back because it lines the pockets of the bums upstairs.

    Give 90% of the tax cut overall money to the top 5%, put a token 5-10% in the lower brackets and
    do massive cut in services that affect mostly, you guessed it, the poorest (most too poor to even pay taxes).

    Supposedly, this tax cut will lead to untold richest for those poor folks by leading to more money being invested in productive assets, when in fact, it's mostly moved into non productive investments like real estate, inflating stock prices or simply moved offshore.

    The fact they have to borrow money (because the US is running a deficit) to finance those tax cuts (especially if the service level remains the same)., means the whole US is financing the richest ability to leverage this money. The US is a bank for those guys.
    edited October 2017 gatorguytzm41macxpressfrankieStrangeDays
  • Reply 16 of 55
    tzm41tzm41 Posts: 78member
    tzm41 said:
    Why do I feel the main theme of the "tax reform" is to put heavier burden on the middle class and give more cut to the big corporates? That doesn't seem very good to me.
    What is proposed doesn’t support your feeling. Middle class and small business owners would see large cuts.
    Some would see large cuts. But who would see larger cuts?
  • Reply 17 of 55
    foggyhillfoggyhill Posts: 4,767member
    tzm41 said:
    tzm41 said:
    Why do I feel the main theme of the "tax reform" is to put heavier burden on the middle class and give more cut to the big corporates? That doesn't seem very good to me.
    What is proposed doesn’t support your feeling. Middle class and small business owners would see large cuts.
    Some would see large cuts. But who would see larger cuts?
    Yes, this is basically the same slight of hands being done EVERY TIME. 
    Distract them by throwing a few dollars down on the ground while you steal their car.
    The US will finance those top guys tax cuts (or services will be drastically cut), basically pumping state money into their pockets or destroying infrastructures and letting the poorest in dire need.
    gatorguytzm41frankiefastasleepjony0
  • Reply 18 of 55
    brucemcbrucemc Posts: 1,499member
    gatorguy said:
    While details on President Trump's proposed tax reform plan remain light, investors are hoping changes could allow Apple to bring some of its overseas cash back to U.S. shores, helping to push the company's stock price to new heights.

    He also assumes that the plan might offer a reduced 10 percent tax rate on accumulated foreign profits. That's particularly noteworthy to Apple, as the company had $261.5 billion in cash as of the end of last quarter, with 94 percent of it held overseas.

    Daryanani's projections call for Apple to repatriate about $219 billion at a reduced rate, using some of the money for share repurchases while holding a "significant portion" for strategic options.
    IMHO not a chance in hell that Apple repatriates $219B to the US even at a 10% tax-rate, and that assumes it doesn't tick up closer to 15% to get holdout legislators on board, or even passes anyway. Apple's effective overseas tax rates are significantly less than that now.

     If I read things correctly Ireland has set up a new special tax rate of 6.5% that companies like Apple, Google and others with intellectual property can take advantage of.

    Then there is Singapore, another strategic country in Apple's tax avoidance strategies. Their standard corporate tax rate is 17 percent but it expects zero for sales generated outside of Singapore. The US will never compete with that. 
    Let's keep the focus of the thread to Apple...

    Apple wants to repatriate some (perhaps a significant portion) of foreign cash in order to continue with share repurchase program without having to take on too much additional debt.  Right now, Apple is spending just about all of their domestic cash (after all other needs) on some repurchases, and then taking on debt to fund the rest.  Apple has accumulated ~100B USD in debt so far (net cash is still at an all time high even with that.  

    At the right repatriation tax rate, they would sooner bring back some of that cash to fund (at least some of) those buybacks going forward.  Apple has already "accounted" for taxes at an average rate from an earnings perspective, so provided the repatriation is lower than what they have accounted for, there is no negative impact to earnings to bring it back.  In fact, if the repatriation rate is less than they have accounted for, it would provide a small boost to earnings (all taxes paid less than what they accounted for in previous years).
  • Reply 19 of 55
    gatorguygatorguy Posts: 19,811member
    brucemc said:
    gatorguy said:
    While details on President Trump's proposed tax reform plan remain light, investors are hoping changes could allow Apple to bring some of its overseas cash back to U.S. shores, helping to push the company's stock price to new heights.

    He also assumes that the plan might offer a reduced 10 percent tax rate on accumulated foreign profits. That's particularly noteworthy to Apple, as the company had $261.5 billion in cash as of the end of last quarter, with 94 percent of it held overseas.

    Daryanani's projections call for Apple to repatriate about $219 billion at a reduced rate, using some of the money for share repurchases while holding a "significant portion" for strategic options.
    IMHO not a chance in hell that Apple repatriates $219B to the US even at a 10% tax-rate, and that assumes it doesn't tick up closer to 15% to get holdout legislators on board, or even passes anyway. Apple's effective overseas tax rates are significantly less than that now.

     If I read things correctly Ireland has set up a new special tax rate of 6.5% that companies like Apple, Google and others with intellectual property can take advantage of.

    Then there is Singapore, another strategic country in Apple's tax avoidance strategies. Their standard corporate tax rate is 17 percent but it expects zero for sales generated outside of Singapore. The US will never compete with that. 
    Let's keep the focus of the thread to Apple...

    Apple wants to repatriate some (perhaps a significant portion) of foreign cash in order to continue with share repurchase program without having to take on too much additional debt.  Right now, Apple is spending just about all of their domestic cash (after all other needs) on some repurchases, and then taking on debt to fund the rest.  Apple has accumulated ~100B USD in debt so far (net cash is still at an all time high even with that.  

    At the right repatriation tax rate, they would sooner bring back some of that cash to fund (at least some of) those buybacks going forward.  Apple has already "accounted" for taxes at an average rate from an earnings perspective, so provided the repatriation is lower than what they have accounted for, there is no negative impact to earnings to bring it back.  In fact, if the repatriation rate is less than they have accounted for, it would provide a small boost to earnings (all taxes paid less than what they accounted for in previous years).
    Apple has made no allowance at all for deferred taxes on the majority of it's profits. Apple has said as much, and which makes perfect sense as there is no circumstance where they believe they ever will pay US corporate taxes on it. 
  • Reply 20 of 55
    I am still waiting for the 1980's tax reform and the promised "trickle down" to reach the poor and middle class.....
    Corporations which will benefit from such 
    tax reform will not use that that extra cash to create jobs in this country history has proven this. More money will be hoarded overseas in tax shelters and the consolidation of wealth and power will keep it's steady pace. 
    frankieStrangeDaysdysamoriajony0
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