From: Richard Kahn

From: Richard Kahn To: njeffrey E." Subject: Fwd: Apple, Inc.: Mar Q'16 Preview: iPhone Demand Better Than Expected Date: Thu, 21 Apr 2016 19:10:05 +0000 Richard Kahn HBRK Associates Inc. 575 Lexington Avenue 4th Floor New York, NY 10022 tel 212-971-1306 fax 646-350-0954 cell 917-414-7584 Begin forwarded message: From: "Morgan Stanley" Subject: Apple, Inc.: Mar Q '16 Preview: iPhone Demand Better Than Expected Date: A ril 20, 2016 at 5:13:22 PM EDT To: < Reply-To: < WEALTH MANAGEMENT Subscription Notification: April 20 Apple, Inc.: Mar Q '16 Preview: iPhone Demand Better Than Expected Katy L. Huberty, CFA — Morgan Stanley April 20, 2016 9:05 PM GMT We raise iPhone estimates in 1H16, lower in 2H16 to reflect stronger than expected demand near-term, as highlighted by our AlphaWise Tracker. We like the set-up heading into a beat / in-line guide given shares trade at 6.5x EVIFCF and the company is likely to raise capital returns again this year. AlphaWise iPhone Tracker estimates 59M unit demand in the March quarter, an uptick from a month ago. Our Tracker, which compiles sell-through data using web search EFTA00682638 analysis, indicated 56.5M unit demand at the end of February. Demand strengthened in March even after we excluded spikes in the data, which we attributed to Apple's iPhone SE introduction. We assume SE demand is only recognized starting in the June quarter. Historically, our Tracker has been accurate directionally though we think the magnitude of the iPhone demand upside is probably not this high in the March quarter. Our Asia tech team, led by Jasmine Lu estimates 40M iPhone supply chain builds, and we think there is at least another 10M of inventory. Therefore, combining supply and demand side data points, we think Apple is likely to report low- to mid-50M iPhones compared to consensus of 51M and management's belief in January they could ship at least 52M. We expect Apple's March quarter results to be near the high-end of guidance range, which has been the norm in recent quarters. We increase our iPhone estimate to 52M from 49M based on stronger demand indicated by our Tracker, lower iPad to 9M from 10M based on supply chain data, and increas Mac to 4.5M from 4.4M based on preliminary IDC data. With these changes, we estimate revenue and gross margin of $52.5B and 39.7%, up from $50.9B and 39.5%, and around the high-end of guidance of $50-53B and 39.0-39.5%. Our EPS also increases slightly to $2.03 from $1.94. In the last 10 quarters, Apple has exceeded the high end of its revenue guidance by 3% on average (actually beat in seven out of the past 10 quarters). It has met or beat the high end of its gross marg Click here to see the full report. This alert is sent from: Andrew Atlas, You received this because you asked to be alerted to: APPLE INC. Please contact your FA if you want to unsubscribe from the alerts. Disclosures: Please see the full report for risks, disclosures and other important information. Important disclosures regarding the relationship between the companies that are referenced in Morgan Stanley research and Morgan Stanley Wealth Management research are available on the Morgan Stanley Wealth Management disclosure website at Morgan Stanley Wealth Management Not Acting as Municipal Advisor Morgan Stanley Wealth Management is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section I 5B of the Securities Exchange Act (the "Municipal Advisor Rule") and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of the Municipal Advisor Rule. Copyright The copyright in materials provided by Morgan Stanley is owned by Morgan Stanley & Co. LLC. Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States. EFTA00682639 O 2016 Morgan Stanley Smith Barney LLC. Member SIPC. 2. EFTA00682640