EFTA02453302

From: Sent: Wednesday, May 2, 2018 9:53 AM To: Jeffrey Epstein Subject: Fwd: Apple, Inc.: Revving the Services Engine HBRK Associates Inc. 575 Lexington Avenue, 4th Floor<=div> New York, NY 10022 Begin forwarded m=ssage: From: "Morgan Sta=ley" Date: May 2, 2018 at 12:52:02 AM EDT To: &I= »=br>Subject: Apple, Inc.: Revving the Services Engine Re=ly-To: < <=td> <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> &nb=p; = CFA — Morgan Stanley May 2, 2018 4:02 AM =GMT Services gr=wth acceleration headlined a better than expected quarter and guide. Even i= smartphone replacement cycles continue to lengthen, we see Apple deliverin= 4% revenue and 16% EPS growth over the next three years with services the p=imary growth engine. Reiterate OW and $200PT. FY18 estimates increase as Services beat and iPhone better than feared. Sign=ficant inventory build in a tight commodity environment and with slowing sm=rtphone growth is creating more noise than typical throughout the smartphon= supply chain. On our updated estimates, slightly lower FY18 iPhone units (=1% y/y) and higher ASPs (+14% y/y) deliver the strongest iPhone revenue gro=th since FY15. This is slightly better than the -3% y/y iPhone units and=+12% y/y EFTA_R1_01554065 EFTA02453302 iPhone ASPs we modeled heading into the print. Flattish iPhone un=ts and slightly declining iPhone ASPs over the next few years translates to=total device (iPhone + iPad + Mac) revenue down low single digits. This as=umes replacement cycles continue to lengthen and allow the powerful growth o= Services (+31% y/y in March) to shine through in results. Net, our FY18 E=S increases to $11.41 from $11 and FY19 EPS is largely unchanged at $13.76= With more predictable, higher margin services revenue driving the model g=ing forward, we see AAPL's multiple expanding with our $200 PT implying 14.=x our FY19 EPS. What we learned from earnings:(+) Services becoming primar= growth driver. Services revenue grew 31% y/y, faster than 27% growth in De=ember (1), despite significant scale ($33B LTM revenue). We don't see Ser=ices growth slowing anytime soon given the many growth levers, including: 1= fewer than half of users pay for services and the paying customer base is g=owing strong double-digits. 2) a broadening data center footprint and new p=yment methods improve the services experience, and 3) strong growth in rela=ively nascent services like Music and Pay along with upcoming services like=Video. Apple grew Services more This alert i= sent from: /a> =You received this because you requested that you receive content and report= from: APPLE INC. =Please contact your FA if you want to unsubscribe from the alerts. <http://www.=organstanley.com/img/cs/spacer.gif> <http://www.=organstanley.com/img/cs/spacer.gif> chttp://www.=organstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs=spacer.gif> <http://www.morganstanley.com/img/cs=spacer.gif> <http://www.morganstan=ey.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs=spacer.gif> <http://www.morganstanley.com/img/cs=spacer.gif> Please see the full report for risks, dis=losures and other important information. <http://www.=organstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs=spacer.gif> <http://www.morganstanley.com/img/cs=spacer.gif> Disclosures: Important disclo=ures regarding the relationship between the companies that are r=ferenced in Morgan Stanley research and Morgan Stanley Wealth Manage=ent research are available on the Morgan Stanley Wealth Managem=nt disclosure website at https://www.morganstanley.com/online/researchdisclosures <https://www.morganstanley.com/online/researchdis=losures> . Morgan Stanley Wealth Management Not Acting as Municipal Ad=isor Morgan Stanley Wealth Management is not acting as a municip=l advisor to any municipal entity or obligated person within the mean=ng of Section 15B of the Securities Exchange Act (the "Municipal A=visor Rule") and the opinions or views contained herein are not i=tended to be, and do not constitute, advice within the meaning of the=Municipal Advisor Rule. Copyright 2 EFTA_R1_01554066 EFTA02453303 The copyright in materials provided by Morgan Stanley is owned by Morgan Sta=ley & Co. LLC. Morgan Stanley Wealth Management is the trade name of M=rgan Stanley Smith Barney LLC, a registered broker-dealer in the=United States. &=bsp; © 2018 Morgan Stanley Smith Barney LL=. 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