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From: Richard Kahn Sent: Wednesday, January 30, 2019 1:55 PM To: Jeffrey Epstein Subject: Fwd: Apple, Inc.: Reasons To Be More Bullish Richard Kahn HBRK Associates Inc. 575 =exington Avenue 4th Floor New York, NY 10022 tel fa cel Begin forwarded message: From: =/b>"Morgan Stanley" Subject: =/b>Apple, Inc.: =easons To Be More Bullish Date: qb>lanuary 29, 2019 at 10:35:38 PM =ST To: Reply-To: 1 EFTA_R1_01844197 EFTA02628033 Katy L. Huberty, CFA— Morgan Stanley January 30, 2019 3:28 AM GMT Apple faces macro headwinds but investor =entiment/ positioning became overly negative, ignoring the strength of =pple's platform. Importantly, non-iPhone revenue grew 19%, ex-China =evenue grew, and newly disclosed iPhone installed base and Services =ubs hint at sustained Services growth. Estimates move =ower, but less than feared. We lower March quarter revenue by 7%, or =48, and FY19e revenue by 1.4% with FY19e EPS moving from $12.39 to =11.50. That said, buy-side expectations deteriorated meaningfully in =he four weeks post Apple's pre-announcement such that even our lowered =stimates are better than feared (bears expect FY19e EPS of $11). =mportantly, Apple made investors feel better about several recent =ebates - 1) weaker iPhone demand, 2) gross margin risk, and 3) Services =rowth deceleration, which we address below in more detail. We continue =o value Apple on a SoTP basis which drives our $197 PT, down from $211 =reviously on our lower revenue estimates offset partially by higher =eer multiples. New insights from earnings that should make investors =ore bullish (or at least less bearish):1. iPhone showing signs of =tabilization. After November and December iPhone sales deteriorated =/M, January sales trends improved, particularly after Apple rolled back =ecent dollar strength in the price of iPhone XR in China. Given Apple's =ecember quarter experience of slowing growth through the quarter, we =on't believe guidance extrapolates the better January trend, leaving =oom for modest upside in the quarter. Additionally, Apple balance sheet =nventory typically increases slightly (+$80M recent 3-year average) in =he December quarter but the $18 inventory increase in December 2018 =ndicates Apple likely didn't push as much into the channel due to =eteriorating demand, suggesting a better set-up than a year ago but =lso that Apple March quarter iPhone revenue will look better than Apple =uppliers. Finally, after the pre-announcement on January 2nd, in This alert is sent from: Andrew Atlas, You received this because =ou requested that you receive content and reports from: APPLE =NC. Please contact your FA if you want to unsubscribe from the =lerts. 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 2 EFTA_R1_01844198 EFTA02628034 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. = 3 EFTA_R1_01844199 EFTA02628035