The sell-off in US stocks which started last Friday, February 2, has hit a lot of companies hard—all except perhaps one of the biggest names on Wall Street, Apple Inc. (NASDAQ: AAPL).
In trading Monday the iPhone maker managed only a modest decline, trading down $0.77 or 0.48% to close the day’s trading at $159.73. This was a huge sigh of relief for AAPL investors who no doubt have been watching the US markets tumble with very little respite.
As of Monday February 2, the DOW has fallen 1,500 points while the S&P 500 has seen a 4.1% decline, the biggest fall for the S&P since 2011. AAPL for its part has managed to do what many other companies have failed to do, maintain investor confidence.
The strong trading reiterates the confidence Wall Street has in the company founded by Steve Jobs. Since his passing, AAPL has been run by Tim Cook. At the time of his appointment many felt that Cook wouldn’t be up to the task but he’s proven himself very capable of handling and even sustaining Jobs’ legacy. The strong trading in the wake of the massive sell-off occurring on Wall Street is a testament to his efficiency in keeping the company running.
Helping to drive confidence in AAPL is the company’s plans to bring back over $400B in cash top the US. The company has seen its fair share of criticism from the US government as well as governments in Europe over its practices of tax avoidance. But the fact is that tax avoidance is entirely legal and although AAPL was fined massively not too long ago, the company seems committed to bring back its cash to the US.
The proposal is being watched closely by everyone, not least Wall Street. Once the cash does reach US shores it will be subject to tax and whilst this will discharge AAPL’s obligation, it is unclear how it will actually affect the company’s balance sheet. Investors so far have proven that they don’t have many fears in that regard; for many, it seems, the repatriation of cash is a big step for AAPL and once which in itself, deserves reward.
Analysts are also quick to point out that AAPL’s effective rate of tax on the money coming in won’t make a hard dent on the company s coffers. This is because before President Trump recast the US tax policy across the board, the tax on repatriated cash was a whopping 35%. Thanks to Mr. Trump, that tax rate has been reduced to 15.5% which means that AAPL will save approximately 15% on its tax bill at the previous rate.
The incentive has clearly worked and AAPL is showing signs of that on current trading. No doubt the US markets will continue to undergo turbulence; what investors will be watching is the trading pattern of AAPL’s stock. The Monday escape will have to be a all-week escape and it will be interesting to see how AAPL holds up.