EFTA02618358.pdf

From: Richard Kahn Sent: Thursday, November 15, 2018 7:39 PM To: Jeffrey Epstein Subject: Fwd: Apple, Inc.: Supply Chain Noise Creates Buying Opportunity; Still Bullish on Services Richard Kahn HBRK Associates Inc. 575 =exington Avenue 4th Floor New York, NY 10022 tel fa cell Begin forwarded message: From: =/b>"Morgan Stanley" Subject: =/b>Apple, Inc.: =upply Chain Noise Creates Buying Opportunity; Still Bullish on =ervices Date: =/b>November 14, 2018 at 8:07:10 PM =ST To: qb><richardkahn12@gmail.com> Reply-To: =/b>c <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/> Wealth =anagement <http://www.morganstanley.com/img/cs/spacer.gif> Apple, Inc.: Supply =hain Noise Creates Buying Opportunity; Still Bullish on =ervices <http://www.morganstanley.com/img/cs/spacer.gif> EFTA_R1_01821651 EFTA02618358 Katy L. Huberty, CFA— Morgan Stanley November 15, 2018 1:03 AM =MT Weaker supplier guidance reflects Apple's already =ore cautious Nov 1 guidance and, importantly, doesn't impact =ur Services growth forecast, which is tied to installed base rather =han new shipments. We're buyers on unit-driven pullback given =ervices and share repurchases drive future earnings. Apple =hares overreact to supply chain revisions. The 8.5% decline in Apple =hares following Lumentum's and Qorvo's negative pre-announcements this =eek suggests investors remain narrowly focused on units, despite the =ncreasing value of Apple Services. As highlighted in our Insight note =ast week, our detailed analysis of Apple Services gives us confidence =n long-term growth and valuation upside as Services becomes a key =rowth driver. As the smartphone market matures, Services takes the =rowth baton from Devices which ultimately results in more stable growth =nd higher margins at Apple (1). Additionally, normalized Services =evenue growth accelerated to 26% Y/Y in FY18 despite iPhone units down =% in the two years leading up to FY18, which suggests unit sales and =nstalled base growth and/or user engagement are not as tied as =nvestors may think. While investors generally support our Services =hesis, news flow around units is creating volatility and a buying =pportunity while the investor base is still in the process of =ransitioning away from units.lmpact of revisions typically outsized at =uppliers relative to Apple. While we believe investors should focus on =ervices rather than units, we provide our view on negative =re-announcements from Lumentum and Qorvo in response to investor =uestions. We believe Apple's December quarter guidance incorporates =hese revisions as guidance was provided less than two weeks ago. Apple =lso provided a wider revenue guidance range ($48) than normal ($28) to =eflect greater demand uncertainty given the higher number of new =roduct launches and greater macro uncertainty in the economy relative to 12 months ago. Importantly, unit revis This alert is sent from: Andrew Atlas, Andrew.Atlas@morganstanley.com 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. <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_01821652 EFTA02618359 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. © =018 Morgan Stanley Smith Barney LLC. Member SIPC. <http://www.morganstanley.com/imecs/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_01821653 EFTA02618360