Apple could repatriate up to $24bn from overseas thanks to US president Donald Trump’s tax cuts, which it is likely to put towards share buybacks worth $122bn.
That’s the verdict of UBS analyst Steven Milunovich, who believes Apple is poised to take advantage of the changes in its capital planning.
President Trump cut the US corporation tax rate from 35% to 21% just before Christmas, and also eased the rules on cash repatriated by US companies from overseas.
Milunovich points out in a briefing note that the tax on repatriated overseas company profits is only 15.5%, giving Apple even more incentive to bring cash home.
“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,” says Milunovich.
“We estimate the excess cash freed up from repatriation could be $24bn, or 3% of the market cap.”
Milunovich goes on to say that Apple’s share buyback policy has been consistent over the past five years, acquiring around 5% of its own shares every year.
He believes that with the ability to repatriate so much of its overseas profits, Apple could spend up to $122bn on buybacks between now and 2019.
His target price for Apple was raised from $175 to $190 per share.