by Cassy Fiano | January 5, 2018 8:13 pm
Speculation swirled over the last several months about the GOP tax bill and whether it would help — or hinder — the United States. While liberals have complained that the tax bill hurts the American people, the first signs of progress on the bill seem to be favorable. Just look at what Apple is doing now.
According to a GBH research note, Apple is set to repatriate approximately $200 billion in foreign cash. This is due largely to the new tax bill, which is seen as extremely beneficial for international companies like Apple. “With the Trump administration and Beltway imposing a 15.5% tax on [repatriated] cash earnings vs. the previous 35% tax rate we expect a surge of overseas cash to come back into the US with large cap tech being the clear beneficiary for 2018 and beyond,” Daniel Ives, head of technology research at GBH Insights, wrote.
Altogether, Ives believes that foreign companies have parked between $550 and $600 billion overseas, looking to escape burdensome corporate taxes. Ives believes that up to $400 billion of that will be repatriated, with Apple providing the bulk of that number with their $200 billion.
By repatriating the money, Apple will pay 15% in taxes on the $200 billion, meaning they will pay approximately $40 billion. Ives believes most of this money will be spent on capital returns and the rest spent on acquisitions, investment spending, research and development.
“We believe accelerated buybacks, another dividend hike, and potentially larger M&A will be the trifecta of benefits shareholders could expect to see in 2018” for Apple, he said. “We strongly believe it is a ripe time for Cupertino to look ahead and make a bigger bet on a new growth area such as streaming video.”
Meanwhile, Macquarie Research believes that around $860 billion will be repatriated this year. “Repatriation is less likely to provide a boost to business investment in our view, but could lead to a stronger US dollar in 1H18,” analyst David Doyle said in a note to his clients.
By returning this much money to the United States, the rumors that Apple is preparing to purchase Netflix are growing louder. “The burning question on the Street’s mind is: does Cook make a big bet with this infusion of cash and do a larger deal (e.g. Netflix) to catalyze and jump start its streaming video/content business,” the GBH note read.
Whether or not the liberal media will pay much attention to this positive development remains to be seen.
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