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Tim CookApple

  • Apple could free up $24 billion of overseas cash due to President Donald Trump’s tax overhaul, a UBS analyst found.
  • The corporate tax plan incentivizes companies like Apple that do big business overseas to bring more profits back home.
  • The money that Apple saves from tax reform could be converted to stock buybacks.
  • To see how Apple’s stock is doing in real time, click here.

Apple will be one of the largest beneficiaries from President Donald Trump’s tax overhaul because as much as $24 billion could be freed up due to the lowered corporate tax rate, UBS Analyst Steven Milunovich said.

Milunovich says that Apple has already been factoring in the lowered statutory US corporate tax rate of 25%—as proposed in President Donald Trump’s tax overhaul—in its target capital structure, which determines how the company finances its operations and growth.

Should repatriation be lower at 15.5%, which Milunovich estimates will be the case, this could mean up to $24 billion in “freed up” cash even while the company maintains a $90 billion net cash position.

“Apple applying a 25% haircut (or anything above 15.5%) to foreign cash when the actual rate is only 15.5% creates a surplus of cash at the target capital structure that can be used for shareholder returns,” Milunovich wrote in a note. “We estimate the excess cash freed up from repatriation could be $24bn or 3% of the market cap.”

The company’s target capital structure has been pretty consistent over the last five years, Milunovich observes, with Apple buying back roughly 5% of its shares each year. 

He sees the company spending up to $122 billion, or 14% of its market cap, on stock buybacks through 2019.

Milunovich raised his price target for the stock to $190 per share from $175, though he doesn’t believe its capital structure has much effect on its valuation.

Apple shares are currently trading at $174.76, up 1.57% so far this year.

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