EFTA02377300.pdf

From: Richard Kahn Sent: Thursday, February 2, 2017 8:06 PM To: jeffrey E. Subject: Fwd: Apple, Inc.: 10-Q Confirms Margin Stability, Revenue Re-acceleration Richard =ahn HBRK Associates Inc. 575 Lexington =venue 4th Floor New York, NY 10022 tel fax 212-320-0381 cell Begin forwarded message: From: =/b>"Morgan Stanley" Subject: =/b>Apple, Inc.: 10-O =onfirms Margin Stability, Revenue Re-acceleration Date: =/b>February 2, 2017 at 1:47:26 PM =ST To: =/b> Reply-To: =/b><mswmir-cie-feedback@morganstanley.com> <http://www.morganstanley.com/img/cs/spacer.gif> =td class=""> = =/a> =td class=""> =td valign="middle" style="padding: 0cm 0cm 0cm 0cm" class=""> <http://www.morganstanley.com/> =Wealth = Management =/p> =/td> Subscription =otification =ebruary 2, 2017 =o:p class=""> =/span> EFTA_R1_01387707 EFTA02377300 chttp://www.morganstanley.com/img/cs/spacer.gif> = = =td class=""> =div style="font-size: 10.0pt; color: #666666; font-weight: normal" rlass=""> = = Download report = =/div> qtd> = = <http://www.morganstanley.com/img/cs/spacer.gif> Apple, =nc.: 10-O Confirms Margin Stability, Revenue Re-acceleration Katy L. Huberty, CFA— Morgan =tanley February 2, 2017 6:44 PM =MT Apple's =0-O, suggests normalized gross margin was better than reported after =djusting for above average warranty accruals. Off-balance sheet =ommitments and supplier receivables signal a continued revenue =ecovery. New references to "Digital Content" could preview upcoming =nvestments and/or M&A. December gross margin stronger than reported after normalizing for =arranty and hedging. After adjusting for above average warranty =ccruals and small hedge gains, normalized gross margin of 39.4% was =loser to flat Y/Y (vs. reported decline of 160bps) despite the stronger =SD (1). We believe this is a function of 1) Apple's efforts to =ressure suppliers for more favorable pricing in light of the company's =igh share of volume and currency movements that benefit suppliers, and =) rising mix of and margins on Services revenue which account for =lmost 12% of LTM revenue versus 9% a year ago.Off-balance sheet =urchase commitments returned to growth ahead of supercycle. Off =alance sheet purchase commitments for outsourcing and components grew =6% Y/Y compared to a 6% decline in FY16. The return to growth occurred = quarter earlier than ahead of iPhone 6 (returned to growth June 2014, =18% Y/Y). Off balance sheet commitments are 96% correlated to next =uarter revenue (3), implying March quarter sales north of $608 compared =o guidance of $S1.5-53.58. Similarly, vendor non-trade receivables =ncreased 19%, an acceleration from flat in September and decline of -8% =n FY16. These receivables have 92% correlation to next quarter revenue =4), and also imply revenue upside. While extrapolations from these =etrics are not always precise and there is a bigger seasonal =iscrepancy in March quarters, directionally they do suggest Apple is =lanning for strong demand and/or making purchase commitments to lock in =avorable pricing, especially in memory. Maintaining strong Capex =uidance and previewing move into content? Other notable updates in =pole's December 10-Q include: 1) A This =lert is sent from: =ndrew Atlas, =a href= =/p> =ou received this because you asked to be alerted to: rlass=""> 2 EFTA_R1_01387708 EFTA02377301 APPLE=INC. =br class=""> Please contact your FA if you want to unsubscribe from =he alerts. =/p> =span style="font-size: 10.0pt; color: #666666" class=""> = =br class="webkit-block-placeholder"> =span style="font-size: 10.0pt; color: #666666" class=""> = =br class="webkit-block-placeholder"> =!-- end content --> 3 EFTA_R1_01387709 EFTA02377302