Apple Stock Could Be Headed for a Huge 2017
Apple Inc. (NASDAQ:AAPL) has not had a particularly fantastic year. Gaining about 10%, coinciding with the market average, is a fair return, but nothing to write home about. But Apple stock bulls got some reassurance today as a Citigroup Inc (NYSE:C) analyst, Jim Suva, gave five reasons why Apple stock can see significant gains in 2017.
Suva’s five reasons are as follows:
“iPhone 8 Super Upgrade Cycle driven by newer form factors driving a stronger upgrade relative to the prior 2 cycles”
“Tax reform benefit from reduction in corporate taxes and cash repatriation”
“Sticky user base which drives continued services revenue growth”
“Enterprise push mid term, Applewood longer term”
“Attractive valuation – Shares trade at a slight discount to their 4 year median multiples despite improving fundamentals ahead”
The last three are largely continuous benefits for Apple stock and have little to do with 2017 specifically. The first two, however, are relatively new factors that can have a big impact on AAPL stock. (Source: “5 reasons Apple is going to soar in 2017, according to Citi,” CNBC, December 13, 2016.)
First, there’s the “iPhone 8” “super cycle” that many analysts have been touting. After a lackluster sales year for the flagship product, many are turning their eyes to some of the major rumored improvements for the eighth iteration of the smartphone as a huge potential boon to the share price of the company.
Some of the potential improvements Apple is looking to integrate into their 10th anniversary product are a buttonless display, an OLED screen, and even wireless charging on some models. The analyst predicts “iPhone” shipments will rise seven percent in the company’s fiscal year 2018. (Source: “Here Are 5 Reasons Why Apple’s Stock Might Rise in 2017,” Fortune, December 13, 2016.)
“We believe iPhone installed base upgrades will take a step up with the launch of iPhone 8,” Suva wrote.
The final reason that makes 2017 stand out is President-elect Donald Trump. Only, he’ll have ditched the ‘elect’ part after January and fully assume the role.
There’s been a lot of talk about Trump lowering taxes on corporations and tax repatriation forgiveness for companies stashing cash overseas. Apple Inc. has a reported $216.0 billion in unrepatriated funds that have never seen the hand of an American tax collector as of September. Trump has spoken of replacing the current 35% rate on these types of funds with a far more friendly 10% tax.
There’s also talk of cutting the corporate rate to 15%, down from the current 35%, which could help boost Apple stock earnings per share by six percent, according to Suva.
“Across our coverage universe, we see Apple as a significant beneficiary of Trump tax reforms,” Suva writes. “Apple is very well positioned to benefit from potential tax reform of either or both a repatriation tax holiday and or a lower corporate tax rate.”