EFTA02602766

From: Richard Kahn < > Sent: Thursday, July 12, 2018 12:12 PM To: Jeffrey Epstein Subject: Fwd: Apple, Inc.: App Store Growth Sustains in June Q Richard Kahn HBRK Associates =nc. 575 Lexington =venue, 4th Floor New York, NY =0022 tel fax cell Begin forwarded message: From: =/b>"Morgan Stanley' < Subject: =/b>Apple, Inc.: App =tore Growth Sustains in June Q Date: =/b>July 11, 2018 at 6:06:46 PM =DT To: =ib>c > Reply-To: =/b> > <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.: App =tore Growth Sustains in June Q <http://www.morganstanley.com/> EFTA_R1_01791399 EFTA02602766 Katy L Huberty, CFA =E2 Morgan Stanley July =1, 2018 10:00 PM GMT C2Q18 App Store revenue of =3.46 grew 27% Y/Y, consistent growth with C1Q18, according to Sensor sower. Results are better than the expected 500 bps Services growth =eceleration modeled by consensus. Accelerating gaming growth in the US, =elped by Fortnite, offset decelerating growth in China. App=Store net revenue sets quarterly record in C2Q; results slightly below =Se but ahead of consensus. According to data compiled by Sensor Tower, =pple's App Store generated over $8B in payments to developers in the =une quarter, implying App Store net revenue (what is recognized on =pple's P&L, net of payments to developers) of $3.4B (+27% Y/Y), a =ew quarterly high (1) but slightly below our forecast of $3.58 (+29% =/Y; 2). While we don't have App Store consensus forecasts, the =treet models total Apple Services revenue growth decelerating from 31% =/Y in March to 26% Y/Y in the June quarter, which we view as too =onservative in light of stable growth indicated by Sensor Tower. App =tore accounts for 36% of Apple Services revenue over the last twelve =onths and is strongly correlated (0.98) with reported Apple Services =evenue. China growth continues to decelerate but US and other countries =rovide offset. China, US and Japan remained the 3 largest App Store =evenue generators in C2Q18, accounting for 76% of total App Store net =evenue, slightly below the T12M average of 77%. App Store growth in =hina decelerated 400bps to 25% Y/Y (4) as did growth in Japan (+11%=/Y), however growth in the US accelerated over 800bps to 36% Y/Y (5). =rowth for all other countries accelerated 100bps to 36% Y/Y, with the =op 10 countries ex-China, US and Japan (by revenue generation) =ccelerating to the fastest quarterly growth rate in over 3 years (7). =s we hypothesized in our App Store deep dive published in May, while =hina, the US and Japan will collectively remain the ballasts for App =tore growth, other smaller but faster growing countries will continue =o increase in importan This alert is sent from: Andrew Atlas, 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. 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 156 of the Securities 2 EFTA_R1_01791400 EFTA02602767 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. © 2018 Morgan Stanley Smith Barney LLC. Member =IPC. <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_01791401 EFTA02602768