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If the U.S. government is able to pass a new tax reform, then it appears that Apple is going to be in a winning situation as far as its market cap goes. One analyst believes that the earnings per share value of Apple is expected to increase in fiscal year 2018, allowing the stock to be pushed to a trillion-dollar market capitalization.
New Proposed Tax Framework Could Reduce Corporate Tax Rates and Allow Deductions for Capital Investments
According to analyst Amit Daryanani of RBC Capital Markets, Apple could have a sizable advantage as well as increase its market cap beyond the $1 trillion threshold if new tax reforms are set on the playing field. The analyst sees earnings per share value growing by between $4 and $4.50 in fiscal year 2018, resulting in the $1 trillion-dollar market cap push.
According to AppleInsider, taxes have become a new focus for both President Trump and Congress after failing to pass meaningful health care reform. The administration has proposed a new tax framework which if passed, could reduce corporate tax rates, allow deductions for capital investments, and lower the repatriation tax rate for cash stashed overseas.
Unfortunately, the framework is still vague at this point, as the analyst has drawn up some assumptions of his own ranging from limits for deductions, tax rates on foreign profits and so on. One of them is the fact that the new tax reforms could reduce Apple’s effective tax rate below 20 percent. It should also be noted that the plan might offer a reduced 10 percent tax rate on accumulated foreign profits.
One of them is the fact that the new tax reforms could reduce Apple’s effective tax rate below 20 percent. It should also be noted that the plan might offer a reduced 10 percent tax rate on accumulated foreign profits.
This intricacy will be of paramount importance to Apple as the tech giant has $261.5 billion in cash as of the end of last quarter, with 94 percent of that amount being held overseas. It is possible that Apple could bring back approximately $219 billion at a reduced rate, using some of the money for share repurchases while keeping a larger portion for future endeavors such as facility expansion or acquisition of a tech company to stay ahead of the competition.
Apple currently has a market cap of $800 billion so we’ll update you if there is any meaningful development in these tax reforms.
News Source: AppleInsider