From: Richard Kahn
To: Jeffrey Epstein <jeevacation@gmail.com>
Subject: Fwd: Apple, Inc.: A Low Bar Into Earnings with Shares Pricing in Unlikely Long-term iPhone
Scenarios
Date: Fri, 25 Jan 2019 02:28:54 +0000
Richard Kahn
HBRK Associates Inc.
575 Lexington Avenue, 4th Floor
New York, NY 10022
Tel
Cel
Begin forwarded message:
From: "Morgan Stanley"
Date: January 24, 2019 at 8:30:50 PM EST
To: <I
Subject: Apple, Inc.: A Low Bar Into Earnings with Shares Pricing in Unlikely Long-term iPhone
Scenarios
Reply-To: <
,,Morgan Stanley
Wealth Management
Apple. Inc.: A Low Bar Into Earnings with Shares Pricing in
Unlikely Long-term iPhone Scenarios
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Katy L. Huberty, CFA— Morgan Stanley
January 25, 2019 1:24 AM GMT
iPhones are weak, Services growth decelerated and investors are asking what will drive
AAPL higher from here. We believe the recent pullback is an attractive entry point given
upcoming Services launches and shares already pricing in extremely cautious iPhone
replacement cycle and ASP headwinds.
Expectations for Dec 0 already set following negative pre; all eyes on March Q guidance.
Apple negatively pre-announced December quarter results on January 2nd (see our full
write-up here), lowering revenue guidance by $78 or 8%, blaming iPhone weakness in
China as the primary driver of the miss. As such, street (and buyside) expectations are
largely aligned for December, and we forecast total revenue of $846, iPhone revenue of
$52.28 (units of 62.3M, ASP of $842), Services revenue of $10.86, a gross margin of
38.0% and EPS of $4.17 (1). While clarity on the Services growth deceleration in
December will also be a key focus for investors (see next paragraph), March quarter
guidance will provide a base for forecasts during the remainder of the year, and with the
stock close to where it was ahead of the pre-announcement, Apple likely needs to deliver a
"better than feared" revenue outlook for shares to recover further in the very near-term. We
model March quarter total revenue of $62.06, iPhone revenue of $34.96 (units of 43M,
down 18% WY), Services revenue of $11.76 (+19% Y/Y), gross margin of 38.4% and EPS
of $2.84 vs. consensus of $59.36 in total revenue, $33.96 in iPhone revenue (on 45.0M
units), Services revenue of $11.36, a gross margin of 38.4% and EPS of $2.65. Based on
investor conversations, we believe the stock could trade up on revenue and gross margin
guidance range of $586 and 38% at the mid-point, respectively, while guidance
meaningfully below these levels would fuel the bear case.Services decel the biggest
question mark from December pre-announcement. Following Apple's Dec Q pre-
announcement, the most common question we have fielded from investors is wha
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