EFTA00643700.pdf

From: Richard Kahn To: "jeffrey E." <[email protected]> Subject: Fwd: Apple, Inc.: March iPhone Demand Tracking Ahead of Expectations Date: Tue, 15 Mar 2016 13:04:16 +0000 positive comments on AAPL from MS this am Pre-market: 103.94 +1.42 (1.39%) Mar 15, 9:03AM EDT Richard Kahn HBRK Associates Inc. 575 Lexington Avenue 4th Floor New York, NY 10022 Begin forwarded message: From: "Morgan Stanley" <ms-wmir(&morganstanley.com> Subject: Apple, Inc.: March iPhone Demand Tracking Ahead of Expectations Date: March 15, 2016 at 12:10:43 AM EDT To: • Reply-To: <mswmir-cie-feedbackOmorganstanley.com> Subscription Notification: March 15 Ape, Inc.: March iPhone Demand Tracking Ahead of Expectations Katy L. Huberty, CFA - Morgan Stanley March 15, 2016 4:01 AM GMT Our AlphaWise iPhone Tracker, which compiles sell-through data using web search analysis, indicates 56.5M units for CIQ with China delivering the strongest growth. This is clearly ahead of expectations as investors are skeptical Apple can reach implied guidance of 52M. EFTA00643700 March quarter iPhone end demand tracking ahead of our model. Extrapolating data through end of February implies demand for 56.5M iPhones for the quarter. This is far ahead of our estimate of 49M and management comments on the last earnings call that indicated they expect at least 52M units. Apple exited last quarter "slightly above" the low-end of its 5-7 week iPhone channel inventory target. Any inventory fill for Apple's indirect distribution channels would put further upward pressure on estimates. Every I M iPhone shipments add $640M of revenue and $0.04 of EPS to our March quarter estimates of $50.9B and $1.94 (cons. $52.1B and $1.99). China remains the country with the strongest growth in our tracker. Management noted economic weakness in Greater China, especially Hong Kong, beginning in the month of December. However, our data indicates positive Y/Y and Q/Q growth through the month of February. Growth improved in most regions as Y/Y compares begin to ease, a promising sign heading into the rest of the year when compares get even easier. Supply chain revisions have bottomed. Our Asia tech team led by Jasmine Lu believes supply chain inventory digestion has come to an end. She currently models 40M builds for both the March and June quarters. However, suppliers built an extra 10M inventory in 2015 which is likely to sell through in the March quarter. Note that a flat Q/Q build for the June quarter is above typical seasonality of a low- to high-teens decline. A new 4" iPhone could provide an additional boost Last week, Apple sent invitations for an event on their campus on Monday, March 21. They will likely announce a refresh to the current 4" iPhone (5s), which has been in the market since S Click here to see the full report. This alert is sent from: Andrew Atlas, You received this because you asked to be alerted to: APPLE INC. Please contact your FA if you want to unsubscribe from the alerts. Disclosures: Please see the full report for risks, disclosures and other important information. Important disclosures regarding the relationship between the companies that are referenced in Morgan Stanley research and Morgan Stanley Wealth Management research are available on the Morgan Stanley Wealth Management disclosure website at htt sl/www morganstanley.com/onlineiresearchdisclosures. Morgan Stanley Wealth Management Not Acting as Municipal Advisor Morgan Stanley Wealth Management is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section 15B of the Securities Exchange Act (the "Municipal Advisor Rule") and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of the Municipal Advisor Rule. Copyright The copyright in materials provided by Morgan Stanley is owned by Morgan Stanley & Co. LLC. Morgan Stanley EFTA00643701  Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States. © 2016 Morgan Stanley Smith Barney LLC. Member SIPC. IPw EFTA00643702