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Tom Forte, D.A. Davidson Sr. Research Analyst joins the Yahoo Finance Live panel to discuss Apple’s "Spring Loaded" event scheduled for 4/20.
AKIKO FUJITA: Well, shares of Apple are trading pretty flat in the session today ahead of that big event for the company tomorrow. The tech giant expected to unveil new iPads and potentially new Macs. Let's bring in DA Davidson senior research analyst Tom Forte. Tom, it's always good to talk to you.
You've got a $167 price target on the stock. When you look at some of these devices we're anticipating the company to unveil, they have seen big pick-up, especially in this work-from-home move. How much of that do you think is likely to be a big driver in getting to that level you see the stock going?
TOM FORTE: Yeah, so had we had this conversation a week ago, I would say the primary driver to my price target would be iPhones leveraging a 5G network buildout. But when I think about the current state of the pandemic, unfortunately, with challenges locally in Michigan and internationally in Brazil, India, France, Canada, et cetera, et cetera, I'm now of the belief that this working remotely, learning remotely situation is a multi-year, you know, 2020 to 2023 at the minimum. And with that backdrop, tablets, laptops, I think they could continue to perform at a high level for several years.
ZACK GUZMAN: Yeah, and Tom, I mean, we always look at these events for exciting new products to come out, right? It's always a good time for Apple to do that. When you look at that, is there anything we might be expecting them to unveil tomorrow?
TOM FORTE: So I think the primary expectation is for more tablets, meaning iPads, and laptops or desktops, iMacs, things of that nature. And again, the beauty for Apple of the pandemic is that from a hardware standpoint, you saw very strong sales in, essentially, their lineup, independent of smartphones. And then in the fall of last year, when they had their big product unveiling for their first-generation 5G smartphones, you started to see that part of the portfolio contribute. And I think that's why the shares were hitting, you know, 52-week highs in December and January.
But as far as new product innovation, you know, we're now getting to the point where Apple is including its own processors in more of its devices. So I expect there to be a lot of focus on the benefits to the consumer, faster speed, things of that nature, longer battery life. But I do think, again, given the current state of the pandemic and this notion that we may be spending, you know, at least portions of each year for the next couple of years working remotely, learning remotely, I think that does bode well for Apple's whole portfolio of hardware, including tablets.
AKIKO FUJITA: Yeah, on that front, it feels like that move they-- or the push of the gains they've gotten from this work from home is coincided with what has, really, actually been a upgrade cycle for their iPhones. It feels like everything's lining up for the company. What do you see is the biggest risk when you think about the upside?
TOM FORTE: It's an excellent question. In my opinion, the most significant risk to Apple is higher tax rates at the corporate level. So we had a sense when President Biden introduced his legislation for infrastructure and this idea of paying for it by increasing the corporate tax rate to 28% from 21%, and Apple is probably one of the largest corporate tax payers in the US. So in my mind, that's the biggest risk to shares of Apple. Because if you go back in time when they lowered the corporate tax rate, it gave Apple a lot more free cash flow that it used to buy back stock. So in my mind, that's the biggest risk right now, the potential for higher corporate tax rates.
ZACK GUZMAN: Yeah, I know you also cover Amazon. It seems like that would be another company that would also stand to have that same headwind in front of them. But is there anything specific to Apple that might set them apart when it comes to that whole battle? I'm sure they're not necessarily going to be able to escape whatever tax bill they have coming their way. But when you look at the relationships between these big tech giants and this administration, I mean, how do you see that kind of back and forth going over the next few months here?
TOM FORTE: I still think, for Amazon, the big risk is unionization. I understand that they had the Alabama vote go in their favor, but if you go back to President Biden when he was campaigning, he said he wanted to be the most union-friendly president ever. So in my opinion, the bigger challenge to Amazon will be in higher-wage markets, like California and New York, when it comes to unionization.
I do recognize that there are rumblings that Amazon is not paying its share for taxes, but recall, Amazon had many years there where their investment cycle caused them not to make money for an extended period of time, which should enable them to have, you know, significant tax credits. So while it's taxation for Apple, it's unionization for Amazon that I think is the biggest risk.
ZACK GUZMAN: All right, DA Davidson senior research analyst Tom Forte, appreciate you coming on here to chat with us today. We'll see what happens at that event tomorrow.