EFTA00697973.pdf

From: Richard Kahn To: Jeffrey Epstein <jeevacation@gmail.com> Subject: Fwd: Apple, Inc.: iPhone Trough Pushed Out a Quarter Date: Wed, 27 Apr 2016 08:55:24 +0000 Richard Kahn HBRK Associates Inc. 575 Lexington Avenue, 4th Floor New York, NY 10022 Tel Fax Cell Begin forwarded message: From: "Morgan Stanley" <I Date: April 27, 2016 at 12:20:31 AM EDT To: <I Subject: Apple, Inc.: iPhone Trough Pushed Out a Quarter Reply-To: WEALTH MANAGEMENT Subscription Notification: April 27 Pin Apple, Inc.: iPhone Trough Pushed Out a Quarter Katy L. Huberty, CFA — Morgan Stanley April 27, 2016 4:01 AM GMT CY16 EPS reset $1.13 lower to $8 on weak Asia demand (Hong Kong), channel inventory reduction, and lower iPhone ASP, offset partially by better Services and iPads. With estimates de-risked, AAPL sets up better heading into iPhone 7 launch given 80% 2-year installed base growth and easier WY comps. March quarter missed expectations on macro headwinds, slower upgrade cycle, and early EFTA00697973 iPhone channel inventory reductions. Mainland China iPhone end demand only declined 5% Y/Y despite a very tough comparison but Hong Kong was weak due to HK$ strength. Emerging market in general continues to be weak while Japan is doing better and Europe actually saw iPhone unit growth Y/Y. In addition, iPhone 6s upgrades are tracking slightly ahead of the 5s but significantly lower than 6. Net, this is causing Apple to lower channel inventory in both the March and June quarters. Services was the bright spot (+20% Y/Y vs. our estimate +15%) driven by App Store and Music. App Store revenue growing 35% Y/Y speaks to Apple's ability to monetize the I B+ device installed base especially as the lengthening upgrade cycle lowers device sales. iPad revenue also surprised positively and beat our estimate by 5%, and Apple expects Y/Y declines to moderate again in the June quarter.June quarter guidance is not as bad as first feared. Apple is lowering channel inventory by $2B or $1.2B more than a year ago. Revenue guidance would have been seasonal without the $1.2B additional destocking. This adjustment also accounts for 50bps of the gross margin decline. Guidance also assumes the company does not meet iPhone SE demand in the June quarter, while there were no supply constraints a year ago. That said, guidance would still have been lower than our pre-earnings revenue and EPS estimates of $47.5B and $1.77 after adjusting for these factors, signaling the mixed macro environment and elongating upgrade cycles.Capital return is as expected though M&A commentary more interesting. We expected Apple to increas 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 https://www.morganstanley.com/online/researchdisclosures. 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 & EFTA00697974 Co. LLC. Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States. C 2016 Morgan Stanley Smith Barney LLC. Member SIPC. EFTA00697975