Apple and Trump: A tax and trade policy calculator

What would a repatriation tax holiday mean to Apple? What would a Chinese trade war cost?

From a note to clients Monday by Raymond James’ Tavis McCourt:

As if trying to forecast iPhone sales isn’t hard enough (even Apple seems to have a hard time), investors are suddenly thrust into trying to understand earnings impacts of potential events such as changes in U.S. and European tax policy and trade policy with China.

Not knowing whether to take the President elect literally or figuratively, McCourt has made some “broad assumptions,” including a worst-case scenario in which Apple has to make all its iPhones in the U.S. and can’t sell any of them to mainland China.

The result is the matrix below that you can use to estimate—with a shaker full of salt—the impact of six scenarios, individually or in combination. If nothing changes under the President elect,  McCourt estimates, Apple will earn $9 per share in fiscal 2017.

Click to enlarge. Can’t see the spreadsheet? Try the website. 

  • Best case: (10% repatriation tax holiday plus new U.S. tax rate at 15%, no China issues or European Union tax.) EPS jumps from $9 to $13.20, stock rockets to $198.
  • Worst case: (12.5% Irish tax, 100% China trade war, 100% U.S. manufacturing, no US tax changes.) EPS falls from $9 to $5, stock plummets to $72.

Those are some pretty broad assumptions. But as McCourt says, forecasting is hard.

See also: Katy Huberty: How Trump’s tax cuts help Apple, hurt HP

One Comment

  1. Robert Paul Leitao said:
    Mr. McCourt is correct. Forecasting is hard.There’s a lot of room for outcomes that fall between his best and worst case scenarios. If one averages the share price outcomes of his two scenarios ($198 and $72) it works out to $135 or roughly a return to the all-time high. That would be a relief for most long-term shareholders who have waited patiently for an eventual rebound in the share price. I expect an outcome closer to Mr. McCourt’s best case scenario and for the share price to break new ground.

    December 21, 2016

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