Apple: How Much ‘Real’ Cash? – Apple Inc. (NASDAQ:AAPL)

Apple (NASDAQ:AAPL) has returned to favor of late. It’s up 23% year to date and 55% from its lows of $90 in June last year. There are several drivers for this, among them:

  1. Recent quarter revenue returned to growth, setting an all-time record,
  2. sales of iPhones also returned to growth,
  3. anticipation of another sales spurt for the upcoming iPhone 8, and
  4. anticipation that Apple may repatriate foreign cash if the Republican Congress offers a lower rate, or a repatriation holiday.

Apple is famous for its stash of cash, reported by Luca Maestri in the January 31 earnings call:

We ended the quarter with $246.1 billion in cash plus marketable securities, a sequential increase of $8.5 billion. $230.2 billion of this cash or 94% of the total was outside the United States.

So the question remains, what is the “real” value of this cash to the investor?

This “real cash” in the U.S. would allow Apple more flexibility in its repurchase and dividend programs.

Assumptions

In order to make the calculation, we need to make several assumptions.

My first assumption is that Apple will repatriate $220 billion of cash. This will leave just $10 billion in foreign cash. I pick this number for several reasons.

  • Any tax holiday might be limited, or could be reversed. Therefore, it would be best not to wait too long to repatriate.
  • This is more than enough to fund strategic projects such as prepaying manufacturers to build capacity in new technology.
  • Since a large percentage of income is from foreign sales, this would grow back quickly.

The second assumption is that the repatriation tax rate would be 10%. While this is an unknowable figure at this point in time, there are reasons to expect that this is reasonable. For one thing, Democrats will push back on any figure, and Trump wants to increase military spending, fund his “wall,” yet still decrease the deficit.

Calculation (in billions)

So, a repatriation of $230 less 10% would be $207.

Add the $16 that is in the U.S. already, and we have…

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