EFTA02342409

From: Richard Kahn <[email protected]> Sent: Monday, July 17, 2017 11:48 AM To: jeffrey E. Subject: Fwd: Apple, Inc.: Adjusting Estimates for October iPhone Launch Richard Kahn HBRK Associates Inc. 575 =exington Avenue 4th Floor Begin forwarded message: From: =/b>"Morgan Stanley" <[email protected]> Subject: =/b>Apple, Inc.: =djusting Estimates for October iPhone Launch Date: =/b>July 16, 2017 at 7:26:14 PM =DT 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> Wealth =anagement <http://www.morganstanley.com/img/cs/spacer.gif> Apple, Inc.: =djusting Estimates for October iPhone Launch <http://www.morganstanley.com/> EFTA_R1_01309366 EFTA02342409 Katy L. Huberty, CFA =E2 Morgan Stanley July =6, 2017 11:21 PM GMT We lower Sept quarter iPhone =nits / GM to reflect an October product launch. FY18 EPS increases 3%=0 $11.80 to reflect the incremental 6M iPhone shipments and improved =Pad demand. Our 11% above consensus FY18 EPS pushes our PT to $182, =rom $177 previously. Look through September guidance to =ven stronger FY18 growth. We expect Apple to report an in-line June =uarter and provide a weaker than consensus September outlook on the =ack of a slightly later iPhone launch than typical (October shipment =aunch instead of September). The delay drives our FY18 estimates higher =nd creates a dynamic of much better than normal December and March =uarter seasonality, providing an attractive set-up for the stock as we =ove past the September guide. While our September quarter Revenue and =PS is 12% and 20% below consensus, our revised FY18 estimates are 13% =nd 11% above consensus, pushing our PT to $182, from $177 (2 & =),Increasing evidence OLED iPhone launches in October, rather than =eptember. In light of the most meaningful feature and technology =pgrades in i Phone's history - including OLED displays, wireless =harging, and 3D sensors for AR - we believe it's reasonable to assume =he new, higher priced OLED iPhone ships in October rather than =eptember. This is consistent with supplier checks by the Morgan Stanley =reater China Technology Hardware team, led by Sharon Shih, as published =n the July Monthly Databook. Our view of demand over the course of the =ext iPhone cycle is unchanged with the 6M lower September shipments now =ncorporated in our FY18 iPhone forecast of 266M (up from 260M) which =ligns with our recent bottom-up analysis of upgrades, retention rate, =nd switchers by region (1).Our new forecast reflects better Dec and Mar =uarter seasonality, on par with 4s cycle. We view iPhone 4s as the best =uide for seasonality during the iPhone 8 supercycle as it is the only =ther time a new iPhone shipped in October (4). During that cycle, =Phone shipments 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_01309367 EFTA02342410 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. © 2017 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_01309368 EFTA02342411