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Why Is Ireland Appealing the Apple Case?

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Nov. 10 2016, Updated 8:05 a.m. ET

Price movement

Apple (AAPL) has a market cap of $601.7 billion. It rose 0.59% to close at $111.06 per share on November 8, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.13%, -3.8%, and 7.9%, respectively, on the same day. AAPL is trading 3.0% below its 20-day moving average, 0.87% below its 50-day moving average, and 8.4% above its 200-day moving average.

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Related ETF and peers

The Schwab US Broad Market ETF (SCHB) invests 2.5% of its holdings in Apple. The ETF tracks a cap-weighted index that measures the largest 2,500 stocks in the United States. The YTD price movement of SCHB was 5.9% on November 8. The market caps of Apple’s competitors are as follows:

  • Alphabet (GOOG) — $538.3 billion
  • Microsoft (MSFT) — $471.9 billion
  • IBM (IBM) — $148.0 billion

Latest news on Apple

In a press release on November 8, 2016, Reuters reported that “Ireland’s government will this week formally submit its appeal against the European Commission’s multi-billion-euro demand for back taxes from Apple, Finance Minister Michael Noonan said on Tuesday.”

It added that “Dublin is seeking to protect a tax regime that has attracted many multinational employers. The European Commission decision has also angered Washington, which accuses it of trying to grab tax revenue that should go to the United States.”

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Performance of Apple in fiscal 4Q16

Apple reported fiscal 4Q16 net sales of $46.9 billion, a fall of 8.9% from the net sales of $51.5 billion in fiscal 4Q15. Revenue of iPhone and Mac products fell 12.4% and 17.4%, respectively, and revenue of services rose 23.5% between fiscal 4Q15 and fiscal 4Q16. The company’s gross profit margin and operating margin narrowed by 180 basis points and 310 basis points, respectively. Its net income and EPS (earnings per share) fell to $9.0 billion and $1.67, respectively, in fiscal 4Q16, compared with $11.1 billion and $1.96, respectively, in fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, AAPL reported net sales of $215.6 billion, a fall of 7.7% year-over-year. The company’s gross margin and operating margin narrowed 100 basis points and 270 basis points, respectively, in fiscal 2016.

Its net income and EPS fell to $45.7 billion and $8.31, respectively, in fiscal 2016, compared with $53.4 billion and $9.22, respectively, in fiscal 2015. AAPL’s cash and cash equivalents and inventories fell 2.8% and 8.7%, respectively, between fiscal 2015 and fiscal 2016. Its current ratio and debt-to-equity ratio rose to 1.4x and 1.5x, respectively, in fiscal 2016, compared with 1.1x and 1.4x in fiscal 2015.

Projections

The company has made the following projections for fiscal 1Q17:

  • revenue of $76 billion–$78 billion
  • gross margin of $38%–38.5%
  • operating expense of $6.9 billion–$7 billion
  • tax rate of 26%

Next, we’ll look at Ford Motor (F).

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