JPMorgan remains Overweight on Apple, Inc. (Nasdaq: AAPL) on expectations that it will be levering up for a large payout.
Analyst Mark Moskowitz commented that a larger buyback and/or dividend could be the start of a “New Apple.” As the risk-on trade fades out, he thinks there could be a reverse of recent deterioration in valuation.
Moskowitz asked what uses Apple might have for its cash should it take on $15 billion, or even up to $25 billion, of unsecured debt in the interim. Instead of paying a tax of around 25 percent to 30 percent following cash repatriation, Apple could easily handle a 2.5 percent to 3.0 percent rate on debt.
Yield on Apple could move from 2.6 percent currently up to 4 percent with the new dividend, while buybacks could easily double.
Apple fell 5.5 percent on Wednesday, moving below the $400 level at one point to a new 52-week low of $398.11. Shares are indicated for a higher open Thursday.
JPMorgan has Apple with a price target of $725.
For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here. Shares of Apple closed at $402.80 yesterday, with a 52 week range of $398.11-$705.07.
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