Why Trump May Actually Be Great for Technology Stocks
One thing that spun the head of tech investors around was the swift and huge sell-off in the sector after Donald Trump won the presidency. The swift and brutal sector rotation was blamed on the potential for trade issues, and some of the very heated rhetoric Silicon Valley executives directed at the president-elect during the campaign. With a week since the election behind us, some are now feeling that the worries may have been overblown.
A new RBC research report makes the case that there are actually numerous reasons for a positive outlook, though the report does cite trade issues with both China and Mexico as potential headwinds. Specifically it points to four reasons why tech could actually benefit from the election outcome:
- Infrastructure spending stimulus
- Reduced corporate taxes
- Cash repatriation tax reform
- Military spending
The RBC team sees numerous top companies as winners due to the reasons mentioned above, and we highlight the four in the firm’s coverage universe that they feel are most likely to benefit. All are rated Outperform.
This is the top pick in the sector and has remained a favorite at RBC for some time. Amphenol Corp. (NYSE: APH) is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable.
Amphenol designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa and sells its products through its own global sales force, independent representatives and a global network of electronics distributors. The company has a diversified presence as a leader in high-growth areas of the interconnect market, including: automotive, broadband communications, commercial aerospace, industrial, information technology and data communications, military, mobile devices and mobile networks.
The analysts feel that all four of the reasons listed for a positive outlook affect this company at least moderately. Shareholders receive a 0.95% dividend. The RBC price objective for the stock is $69. The Wall Street consensus price target is $68.27. The shares closed Wednesday at $67.80.
This technology giant has had a rough year, still down over 10% from highs posted in the summer of 2015, in a market making new highs. Apple Inc. (NASDAQ: AAPL) revolutionized personal technology with the introduction of the Macintosh in 1984, and it is among the leaders in the world in innovation with the iPhone, iPad, Mac, Apple Watch and Apple TV.
Apple’s four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services, including the App Store, Apple Music, Apple Pay and iCloud.
RBC cites the company’s gigantic cash position and noted this in the research report:
The main benefit here would come from lower taxes and more so the cash repatriation given Apple’s $230 billion+ cash reserve, 90%+ of which is offshore.
Both Trump and Congress have indicated they want to lower the tax rate on repatriating cash back to the United States, with some seeing the rated dropped to as low as 8% to 10%.
Apple investors receive a 2.13% dividend. RBC has a $125 price target, and the consensus target is higher at $130.91. The stock closed trading on Wednesday at $109.99.