“UBS’s Steve Milunovich today reiterates a Buy rating on shares of Apple (AAPL), and a $500 price target, after roaming through the company’s 10-Q filing, released yesterday following the company’s fiscal Q2 report on Tuesday evening,” Tiernan Ray reports for Barron’s.
“Milunovich also offers his model for Apple’s possible debt issuance, in conjunction with its doubling of the capital payout plan through 2015. He is calculating potential debt issuance at $40 billion,” Ray reports. “[Milunovich writes], ‘Assuming constant annual growth of $11.5bn in US cash, we expect the company will raise about $40bn in debt. With the proceeds, Apple should be able to keep its US cash position slightly below $20bn vs $43bn currently. All the debt might be raised this year, but we have spaced it out. At full issuance, total debt-to-LTM EBITDA of roughly $14bn would be 0.7x. We apply a conservative 2.25% coupon, a slight premium to recent IBM issuances, to calculate interest expense. The increased interest expense lowers our EPS by less than 0.5% annually over the next several years.'”
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