<table><tr><th>From:</th><th>Richard Kahn &lt;l</th></tr><tr><td>Sent:</td><td>Thursday, January 25, 2018 1:31 PM</td></tr><tr><td>To:</td><td>Jeffrey</td></tr><tr><td>Subject:</td><td>Fwd: Apple, Inc.: We Expect Dec Q Beat, Limited Risk of a Guide Down</td></tr></table>

Richard Kahn
HBRK Associates Inc.
575 =exington Avenue 4th Floor
New York, NY 10022
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Begin forwarded message:

From: =/b>"Morgan Stanley" <ms-wmir@morganstanley.com>

Subject: =/b>Apple, Inc.: We =xpect Dec Q Beat, Limited Risk of a Guide Down

Date: =/b>lanuary 25, 2018 at 12:40:01 AM =ST

To: =/b><richardkahn12@gmail.com>

Reply-To: =/b><mswmir-cie-feedback@morganstanley.com>

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Wealth =anagement

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Apple, Inc.: We =xpect Dec Q Beat, Limited Risk of a Guide Down

## <http://www.morganstanley.com/img/cs/spacer.gif> (cont.)

## Katy L. Huberty, CFA =E2 Morgan Stanley

January =5, 2018 5:30 AM GMT

Faster iPhone mfg ramp =ranslates to C4Q beat but lower CM estimates. However, a March quarter =uide down relative to consensus is unlikely due to mis-modeled ASPs, in =ur view. Our lowered estimates also consider slower iPhone X demand =ate cycle but we remain 13% above FY18 consensus EPS. Positively biased into the December quarter print. Our bottom =p analysis of upgrades from the aged iPhone installed base and switcher =arket share gains point to iPhone shipments down slightly in the US, up =lightly in Europe, but up strong double-digits in China during FY18 =1). Our proprietary AlphaWise data confirms accelerated market share rains in China post the iPhone 8/X launch which sustained through =id-December (2) and we see accelerating growth in China as a key metric =o monitor in the December quarter. Greater China revenue growth of 12% =n the September quarter, already accelerated from -10% Y/Y in June, and =e see the potential for a similar step-up in growth during December. =ven after contemplating increased price elasticity late in the iPhone X =ycle and some push out of upgrades on cheaper battery replacements and =ew product rumors, we model revenue and EPS 9% and 13% above consensus =n FY18 largely driven by our higher iPhone ASPs and bullish China =hesis. We also now model slight iPhone and total revenue growth in =Y19, compared to declines previously, on the back of an easier comp and =elayed upgrades. We agree with the market view of a December quarter =arnings beat. Apple produced as much as 6-7M more iPhone X units than =e originally modeled (see report Hon Hai Precision: iPhone X Builds roost the Revenue Scale and Thus Profit) which after considering some =pill-over of shipments into March and cannibalization of lower-end =nits, we raise December quarter iPhone shipments to 80M (from 76M) and =Phone ASP to $819 (from $771). After adjusting Mac, iPad, and Watch =hipments to align with recent supply chain and carrier comments and services r

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Andrew Atlas, Andrew.Atlas@morganstanley.com

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<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.

## Katy L. Huberty, CFA =E2 Morgan Stanley (cont.)

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.

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