EFTA02534848.pdf

From: Richard Kahn Sent: Thursday, January 25, 2018 1:31 PM To: Jeffrey Subject: Fwd: Apple, Inc.: We Expect Dec Q Beat, Limited Risk of a Guide Down Richard Kahn HBRK Associates Inc. 575 =exington Avenue 4th Floor New York, NY 10022 Begin forwarded message: From: =/b>"Morgan Stanley" <[email protected]> Subject: =/b>Apple, Inc.: We =xpect Dec Q Beat, Limited Risk of a Guide Down Date: =/b>lanuary 25, 2018 at 12:40:01 AM =ST To: =/b><[email protected]> Reply-To: =/b><[email protected]> <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/> Wealth =anagement <http://www.morganstanley.com/img/cs/spacer.gif> Apple, Inc.: We =xpect Dec Q Beat, Limited Risk of a Guide Down EFTA_R1_01679968 EFTA02534848 Katy L. Huberty, CFA =E2 Morgan Stanley January =5, 2018 5:30 AM GMT Faster iPhone mfg ramp =ranslates to C4Q beat but lower CM estimates. However, a March quarter =uide down relative to consensus is unlikely due to mis-modeled ASPs, in =ur view. Our lowered estimates also consider slower iPhone X demand =ate cycle but we remain 13% above FY18 consensus EPS. Positively biased into the December quarter print. Our bottom =p analysis of upgrades from the aged iPhone installed base and switcher =arket share gains point to iPhone shipments down slightly in the US, up =lightly in Europe, but up strong double-digits in China during FY18 =1). Our proprietary AlphaWise data confirms accelerated market share rains in China post the iPhone 8/X launch which sustained through =id-December (2) and we see accelerating growth in China as a key metric =o monitor in the December quarter. Greater China revenue growth of 12% =n the September quarter, already accelerated from -10% Y/Y in June, and =e see the potential for a similar step-up in growth during December. =ven after contemplating increased price elasticity late in the iPhone X =ycle and some push out of upgrades on cheaper battery replacements and =ew product rumors, we model revenue and EPS 9% and 13% above consensus =n FY18 largely driven by our higher iPhone ASPs and bullish China =hesis. We also now model slight iPhone and total revenue growth in =Y19, compared to declines previously, on the back of an easier comp and =elayed upgrades. We agree with the market view of a December quarter =arnings beat. Apple produced as much as 6-7M more iPhone X units than =e originally modeled (see report Hon Hai Precision: iPhone X Builds roost the Revenue Scale and Thus Profit) which after considering some =pill-over of shipments into March and cannibalization of lower-end =nits, we raise December quarter iPhone shipments to 80M (from 76M) and =Phone ASP to $819 (from $771). After adjusting Mac, iPad, and Watch =hipments to align with recent supply chain and carrier comments and services r This alert is sent from: Andrew Atlas, [email protected] 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_01679969 EFTA02534849 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. © 2018 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_01679970 EFTA02534850