EFTA02678175.pdf

From: Tazia Smith <-> Sent: Tuesday, October 29, 2013 11:24 AM To: jeffrey epstein Attachments: Disclaimer.txt Classification: Public Good Morning Jeffrey - As=you likely saw, AAPL recouped immediate losses in the aftermarket yday (tr=ding back up to —527) after mgmt comments on the conference call suggestin= that lower gross margins were a result of deferrals. Will watch for any f=llow-through (the sell side has been broadly positive in response to earni=gs) and opportunity to sell OTM calls today. Fyi only, DB's summary of AAP=.'s earnings report and commentary below (reit 575 tgt). Tazia Source: bloomberg, streetaccount.com, db global markets research, 10/=8/13 Tazia Smith Director Markets Coverage Group Deutsche Bank Securities, Inc. Deutsche Asset & Wealth Managem=nt 345 Park Avenue - 26th Floor New York, NY 10154 Tel: (212) 454=2889 Mobile: Fax: E-mail: From: EVS=EquityFocus Sent: 10/29/2013 10:01 AM GOT Su=ject: DB: AAPL.OQ - Chris Whitmore Classification: Public Apple Inc (Buy, CP: $529.38, TP: $575.00, AAPL.OQ, Chris Whitmore) Product cycles kicking into gear AAPL reported revs of $37.58 and EPS of $8.26 which beat expectation (vs. DB at $36.9B/$8.02; Street at $36.8B/$=.93). Apple beat on iPhone units (33.8M vs. DB at 32.5M) and iPads (14.1M vs. DB at 12M) and Mac results were light (4.6M EFTA_R1_01975243 EFTA02678175 vs. DB at 4.8M). iPhone mix and operating leverage translated into OM (26.8% vs. DB at 26.1%) and EPS upside. AAPL will defer - $900M in the Dec Q related to SW deferrals which impacts cash EPS but not cash flow. Consequently, we trim EPS est's b=t at —8x CY14 EV/FCF we believe AAPL represents an attractive value; maintain Buy and $575 PT. Margin guidance was solid after a=justing for software deferrals Apple guided Dec Q revs to $55-58B w=ich beat expectation (vs. Street at $55.5B). GM's guidance of 36.5-37.5% =ncludes $900M of incremental software deferrals Q/Q related to including Mavericks, ilife and iWork for free. We estimate - $500M of this total is related to a change in accounting accrual per device ($5 incremental per iPhone, iPad & iPod touch unit; $20 incremental per Mac). The remaining -$400M is related to higher volume of unit shipments in the December quarter. When comparing guidance on a like for like basis (i.e. ex the accounting change) Apple guided 4Q GM's to —38% which was in line with Consensus on reve=ues of $57B +/- $1.5B which is above Consensus, suggesting improving iPhone 55 supply. Several catalysts ahead We expect strong holiday demand for Apple's new product lineup and suspect its guidance will prove conser=ative. Furthermore, Apple remains very confident in its product pipeline heading into CY14. Specifically, we see multiple catalysts to support growth over the next 12-18 months including iPhone 6, expansion with China Mobile and further geographic expansion. In addition, Apple pointed to expanding into new product areas (Apple TV and/or wearables) which should alleviate innova=ion concerns. Cutting estimates to reflect acco=nting changes; maintain Buy and $575 PT We adjust CY14 est's to $180B/=$43.90 (vs. prior to $184B/ $46.00) and introduce CY15 of $188B/ $48.35. Our $575 PT is unchanged and is based on —9x CY14E EV/FCF; the lower end of its historical 7-29x range. We view the multiple as appropriate given AAPC=;s growth/profit profile. Risks include product execution, ASP declines & phone / tablet comp'n. Please click on below link for full report: http://pu=Ldb-gmresearch.com/p/558-2231/11731481/0900b8c0877292a9.pdf <http://pull.db-gmresearch.com/p/558- 2231/11731481/0900b8c087=292a9.pdf> Regards, EVS Equity Focus Telephone: - 19 Please ensure all mails are also sent to our shared inbox evs.equityfocus@d=.com to avoid getting overlooked. This email is sent to you by Evalues=rve on behalf of Deutsche Bank Diese email wurde Ihnen von Evaluese=ve im Auftrag der Deutschen Bank gesendet For additional Deutsche Bank research, visit our web site: http=//gm.db.com/equities Please refer to the disclaimer that applies to the research attached in this email. This e-mail may contain confidential and/or privileged information. If you are not the intended recipient (or have received this e-mail in error) please notify the sender immediately and delete this e-mail. Any unauthoriz=d copying, disclosure or distribution of the material in this e-mail is stric=ly forbidden. Please refer to http://www.db.com/en/content/eu_disclosures.htm for additional EU corporate and regulatory disclosures. 2 EFTA_R1_01975244 EFTA02678176 This communication may contain confid=ntial and/or privileged information. If you are not the intended recipient (or have received this communication<=r> in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of thear> material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. 3 EFTA_R1_01975245 EFTA02678177