Brian Fitzgerald Jefferies Top Analyst
Much of the stock market’s sharp rally has been credited to the presidential election, and now the expectations for tax reform are quite high. Today, Jefferies’ research department highlighted a handful of stocks that it believes are likely to benefit from even a slimmed down tax package. Let’s take a look and see how Trump’s tax reform would affect e-commerce leader Amazon.com, Inc. (NASDAQ:AMZN) and tech giant Alphabet Inc (NASDAQ:GOOGL).
Jefferies’ top analyst Brian Fitzgerald points out that any reduction in corporate tax rates would benefit Amazon, which currently pays an effective tax of over 30%. In addition, with about half of units sold by third-party vendors, a border tax would not impact Amazon as much as investors might think (the burden would fall on the vendors). This represents an additional advantage over brick and mortar competitors. Additionally, the one-third of sales Amazon derives from outside North America would not be subject to a border tax.
In addition, Fitzgerald points out that Alphabet has $50 billion of cash overseas with no current plans to repatriate. The implied tax bill on that $50 billion is around $17 billion assuming a standard 35% tax rate. If one assumes a Trump tax holiday rate of 10%, the implied tax bill would be $5 billion, a savings of $12 billion, which reflects upside worth around $18 per share to investors. Fitzgerald views Google as being particularly likely to repatriate offshore cash if given the opportunity. Fitzgerald highlights that the internet giant has a history of using domestic cash for M&A (YouTube, Android, DoubleClick, Motorola, AdMob, Waze, Nest) and more recently, to fund its $7 billion stock repurchase plan.
Fitzgerald rates both Amazon and Google a Buy with $975 and $1000 price targets, respectively.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Brian Fitzgerald has a yearly average return of 15.5% and a 71% success rate. Fitzgerald is ranked #80 out of 4557 analysts.