275  7TH Ave  7th floor New York , NY 10001                                                                                                                dcullinanecpa@yahoo.com

​                                                                                                                                                                                                     Chelsea / Lower Manhattan​​

​Daniel Cullinane CPA                                   p 848-250-9587                                                                                                                                     

Smartphone prices rose 10% in the fourth quarter of 2017, compared to the same quarter a year earlier. The rate of increase was a record. Research firm GfK reported:

Global smartphone demand grew one percent to 397 million units in 4Q17
Average sales price increased by 10 percent year-on-year
Smartphone demand in 2017 totaled 1.46 billion units, generating revenue of USD 479 billion

Global smartphone sales reached 397 million units in the fourth quarter of 2017 (4Q17), a one percent increase year-on-year. Demand was primarily driven by Middle East and Africa, which experienced eight percent growth, and Central & Eastern Europe, where demand grew seven percent. Global smartphone average sales price (ASP) increased by 10 percent year-on-year to USD 363, its fastest quarterly growth

What smartphone companies can no longer gain in unit sales, some are making up on margin.

China was the market that posted the largest sales for the full year. That’s no surprise because of the size of its wireless subscriber market. Smartphone unit sales rose 454 million, a growth of only 1%. However, revenue rose by 14% to $152 billion. “Emerging Asia” sales were next at 232 million units, up 8%. Revenue rose 24% to $42 billion. North American sales ranked third, but up only 2% to 198 million units. Revenue rose only 1% to $84 billion.

The uneven growth in unit sales last year is related primarily to a slowing in the huge U.S. and Chinese markets. Growth is more robust in Emerging Asia, Central Europe (85 million units, up 9%) and Latin American (up 9% to 116 million).

Global smartphone sales have moved from a market share battle, which was waged when smartphone units sales were still rising, to a competition over price. That favors companies like Apple Inc. (NASDAQ: AAPL), which has had the most expensively priced smartphones in the world and, by some measures, the best profitability

Wal-Mart Stores Inc. (NYSE: WMT) announced minimum pay and other benefits for its more than 1 million U.S. employees. The world’s largest retailer is raising its minimum wage by $1 an hour to $11, expanding maternity and parental leave benefits and paying eligible employees a one-time $1,000 cash bonus.

The minimum wage increase takes effect next month and represents an incremental increase of $300 million to the company’s plan for the next fiscal year. The one-time bonus payment increases planned spending by an additional $400 million.Without saying exactly how recent changes in U.S. tax law will affect the company, Walmart acknowledges that the new law “will create some financial benefit for the company.” The company said it would share more details when it reports quarterly results on February 20.

Walmart CEO Doug McMillon said:

We are early in the stages of assessing the opportunities tax reform creates for us to invest in our customers and associates and to further strengthen our business, all of which should benefit our shareholders. However, some guiding themes are clear and consistent with how we’ve been investing — lower prices for customers, better wages and training for associates and investments in the future of our company, including in technology. Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.

The increased hourly wage takes effect for the February 17 pay period and the raise adds to already planned increases. This is the third minimum wage increase the company has implemented since 2015.The one-time bonus payment will be based on length of service, with the full $1,000 payment going to employees with at least 20 years of service. According to Carl Quintanilla of CNBC, nearly 85,000 employees have 20 plus years of service and will qualify for the full $1,000, while another 200,000 or so will get $750. More than 600,000 will directly benefit from the minimum wage increase.

In addition to increased maternity and parental leave benefits, Walmart said it will provide up to $5,000 to both hourly and salaried employees to assist with adoption expenses.While it’s not entirely clear how large an impact the new tax law will have, Walmart should see a significant benefit. The company’s effective tax rate over the past three years has been around 32%. Pretax income for the company’s 2017 fiscal year ended last January was $22.76 billion. At the new 21% corporate rate, Walmart’s tax bill could shrink by at least $2 billion.

Walmart stock traded down about 0.5% in early trading Thursday morning, at $99.12 in a 52-week range of $65.28 to $102.35. The 12-month consensus price target on the stock is $102.30.

Apple Inc. (NASDAQ: AAPL) saw an incredible return in 2017, and the iPhone giant looks to be on track for another incredible year, according to one analyst. Overall the stock gained nearly 50% in 2017 alone, beating out all the broad markets. Most analysts are tripping over themselves raising their price targets on Apple, but at some point this stock will have to run on something other than analyst upgrades. Until then …

Merrill Lynch raised its price target to $220 from $180, implying 25% upside from the most recent closing price, $176.19. The firm expects a strong year for Apple, considering its cash repatriation, iPhone average selling price (ASP) and gross margin upside. Merrill Lynch does not expect growth in gross profit dollars to turn negative this cycle versus prior cycles. Significant upside remains to calendar 2019 EPS estimates, given both unit and ASP increases for iPhones and improving services mix.

Merrill Lynch divvied its report up giving a bull/bear argument for where this stock stands. Separately, 24/7 Wall St. has compiled its own bullish and bearish case for where Apple could go in 2018.

The firm gave its bullish case as follows:

We view 2018 as a year that could witness the largest cash repatriation with Apple potentially repatriating $240bn. Bulls focus on (1) Using cash for M&A, buybacks or dividend increases; (2) A smoother iPhone cycle with two years of unit and ASP growth; (3) Upside to gross margins as iPhone ASP, Services mix, commodity pricing are tailwinds; (4) Continued strong growth in Services; (5) A larger OLED (organic lightemitting diode) phone in 2018 with rear 3-D sensing that broadens the product line further; (6) increased adoption of AR/VR driving Apple’s lead further; and (7) HomePod, increased content, innovation around autonomous and AI.

The bearish argument:

Bears expect pressure on shares driven by (1) Decelerating mix of iPhone X as higher ASP creates demand headwinds post initial launch uptake; (2) gains at the lower end of the portfolio create less mix-adjusted ASP uplift than prior assumptions; (3) Demand for iPhone X likely to roll over earlier relative to iPhone 6 cycle; (4) China demand for iPhone X likely weaker beyond initial ramp given higher ASP; (5) Significant positive revisions in the last 12 months reflect run-up in shares and there is higher risk to negative revisions as 2018 iPhone is likely incremental; (6) A potential flexible OLED phone from Samsung in 2018 can create share headwinds; and (7) potential backlash on iPhone slowdowns.

Shares of Apple traded at $175.67 on Wednesday, with a consensus analyst price target of $186.87 and a 52-week range of $119.37 to $179.39.

PRICES SOAR

​JANUARY NEWSLETTER 5

After Apple Inc. (NASDAQ: AAPL) announced that it would contribute $350 billion to the U.S. economy, there has been at least some attention to how it gets there. The reality is that this is a tax reform move, although the company did not mention tax reform in its press release. One of the big direct portions of the contribution is going to be around repatriation.

Apple indicated that it will pay $38 billion in repatriation taxes under the new tax law. Apple says that it is already the largest U.S. taxpayer, and it said that a payment of that size ($38 billion) likely would be the largest of its kind ever made.

24/7 Wall St. has tracked companies with the largest cash balances before, and many are in technology. If the 15.5% repatriation rate, down from 35% previously, were applied all-in on cash for Apple it would translate to a whopping $245 billion in cash. That being said, there is also a rate of 8% that is applied under the new tax code for illiquid assets and Apple may be including some of that rather than this being all cash.

Forbes once used a figure of an estimated $3.1 trillion in earnings stockpiled overseas going back to 1986. Not all of that is coming back and some of it may have already come back. Here is how you get to just over $1 trillion (rounded, using the most recent quarterly financial reports) back into the United States.

Obviously, not all that cash is held overseas. That being said, many companies, particularly technology companies, have been holding an overwhelming majority of that cash overseas. Many have even issued debt in the United States to fund buybacks, dividends and acquisitions here at home.24/7 Wall St.
2 Blockchain Tracking ETFs Launch as Bitcoin Plummets in Value

Here’s how you get to $1.01 trillion in cash, short-term and long-term investments with just 16 companies:

Apple holds $269 billion in cash and investments.
Microsoft holds $143 billion.
Alphabet holds $107 billion.
Cisco holds $76 billion.
Oracle holds $71 billion.
Coca-Cola holds $50 billion.
Amgen holds $41 billion.
Qualcomm holds $38 billion (spoken for in NXP merger, if Broadcom doesn’t win).
Facebook holds $38 billion.
Gilead Sciences holds $41 billion.
Intel holds $27 billion.
IBM holds $25 billion.
Pfizer holds $24 billion.
Merck holds $23 billion.
Procter & Gamble holds $21 billion.
Pepsico holds $20 billion.I'm interested


​The U.S. International Trade Commission (ITC) is expected Friday to file its staff report on whether Boeing Co. (NYSE: BA) was harmed by the sale of 75 single-aisle passenger jets from Canada’s Bombardier to Delta Air Lines Inc. (NYSE: DAL) last March.

The ITC staff is expected to determine that Boeing was indeed harmed and to affirm the Commerce Department’s ruling last month that any Bombardier passenger jet exported to the United States will be subject to duties totaling nearly 300%.

Canada on Wednesday took the expected step of filing a complaint with the World Trade Organization (WTO) challenging the U.S.’s rules related to antidumping and countervailing duty investigations as inconsistent with WTO rules.

Boeing has won at every step of the U.S. process for resolving the dispute with Bombardier, and Friday’s ruling should be no exception. The basis for that expectation is a statement in the Commerce Department’s ruling that Bombardier failed to respond to certain questions and that failure essentially overrode any other Bombardier argument.

A Seattle trade attorney, William Perry, commented on the WTO filing to industry analyst Scott Hamilton at Leeham News:

In truth a filing at the WTO, does not have any direct effect on the case.  The complaint will start up a litigation dispute at the WTO between the US and Canada, but getting an answer from a Dispute Resolution Committee will literally take years. …

Also, the WTO has no power to literally tell the Commerce Department and the ITC what to do, never mind actually interfere in an ongoing proceeding.  …

The Canadians in their complaint focus on the Counter Vailing Duties but do not focus on Bombardier’s failure to respond in the Antidumping Case. The WTO will affirm Commerce on that decision. …

In short, it does not appear that Boeing has anything to worry about, either in the ITC case or the WTO complaint. Investors took Boeing’s stock to another 52-week high Thursday morning, at $326.48. The 52-week low is $156.67, and the 12-month consensus price target on the stock is $312.04

​WALMART BOOST PAY

​ANALYSTS VIEW

​CORPORATE CASH

​CANADA FILES TRADE COMPLAINT