EFTA02572521.pdf

From: Richard Kahn a> Sent: Friday, November 3, 2017 12:57 PM To: jeffrey E. Subject: Fwd: Apple, Inc.: X Marks the Spot Richard Kahn HBRK Associates Inc. Begin forwarded message: From: =/b>"Morgan Stanley' Subject: =/b>Apple, Inc.: X =arks the Spot Date: November 2, 2017 at 11:38:35 PM EDT To: =ib > Reply-To: =1 > <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.comh Wealth =anagement <http://www.morganstanley.com/img/cs/spacer.gif> Apple, Inc.: X Marks =he Spot <http://www.morganstanley.com/img/cs/spacer.gif> EFTA_R1_01742157 EFTA02572521 Katy L. Huberty, CFA =E2 Morgan Stanley November =, 2017 3:32 AM GMT We see iPhone X unlocking =ent-up iPhone upgrades, especially in China, driving 20%+ iPhone unit =rowth and Revenue and EPS 15-16% above consensus in FY18. Accelerating =rowth in China contributed to the clean Sept Q print and Dec Q guidance =hich is supportive of our thesis. Remain OW. Guidance =etter than feared, above consensus estimates largely unchanged. =nvestors worried that a slower than expected iPhone X production ramp =osed risk to December quarter guidance but the combination of 1) =ccelerating emerging market growth with Greater China returning to =rowth and India revenue doubling, 2) broad strength across categories =hich all grew Y/Y, and 3) recent price increases across many products =hich offsets slower iPhone X production ramp, drove in-line guidance. =ur December quarter revenue is largely unchanged but EPS increases on =etter gross margin, and operating income. Our bottom-up iPhone unit =orecast by region points to 268M iPhone shipments in CY18, ahead of =onsensus forecast of 242M. China is the biggest contributor to 2018 =rowth, with our bottom up forecast pointing to 74M shipments, an 80% =ncrease from 41M shipments in LTM (through June), as the large base of =Phone 6 owners upgrade to the first major form factor change since late =014 and Apple takes share from Android (1). Combined with higher than =onsensus ASPs, we model FY18 Revenue of $307B, 15% above consensus, and =PS of $13.00, 16% above consensus. We see further upside to AAPL shares =n the back of positive earnings revisions as iPhone X shipments ramp. =ur price target increases slightly to $200 (from $199), driven by 15.4x =ur FY18e EPS of $13.00.Most important takeaways from the quarter:Recent =nnovation puts upward pressure on gross margin despite memory, iPhone X =roduction ramp costs. Apple faces a 110bps headwind from higher memory =rices Y/Y in the December quarter, as well as higher iPhone production =amp costs Y/Y as these costs are spread across the Septembe This alert is sent from: Andrew Atlas You received this because you requested =hat you receive content and reports from: APPLE =NC. Please contact your FA if you want to unsubscribe from the =lerts. <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> Disclosures: Please see =he full report for risks, disclosures and other important =nformation. Important disclosures regarding the =elationship between the companies that are referenced in Morgan Stanley =esearch and Morgan Stanley Wealth Management research are available on =he Morgan Stanley Wealth Management disclosure website at https://www.morganstanley.com/online/researchdisclosures. 2 EFTA_R1_01742158 EFTA02572522 Morgan Stanley Wealth Management Not Acting as Municipal =dvisor Morgan Stanley Wealth Management is not acting as a municipal =dvisor to any municipal entity or obligated person within the meaning =f Section 158 of the Securities Exchange Act (the "Municipal Advisor =ule") and the opinions or views contained herein are not intended to =e, and do not constitute, advice within the meaning of the Municipal =dvisor Rule. Copyright The =opyright in materials provided by Morgan Stanley is owned by Morgan =tanley & Co. LLC. Morgan Stanley Wealth Management is the trade =ame of Morgan Stanley Smith Barney LLC, a registered broker-dealer in =he United States. © 2017 Morgan Stanley Smith Barney LLC. Member =lPC. <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> 3 EFTA_R1_01742159 EFTA02572523