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From: Richard Kahn
Sent: 5/30/2019 3:19:40 PM
To: Jeffrey Epstein [jeevacation@gmail.com]
Subject: Fwd: Apple, Inc.: Addressing The Top 5 Investor Questions
Importance: High
Richard Kahn
HBRK Associates Inc.
575 Lexington Avenue 4th Floor
New York, NY 10022
Begin forwarded message:
From: "Morgan Stanley" <ms-wmir@morganstanley.com>
Subject: Apple, Inc.: Addressing The Top 5 Investor Questions
Date:  May 29, 2019 at 6:35:01 PM EDT
To: <_________________________
Reply-To: <mswmir-cie-feedback@morganstanley.com>
FF.
Wealth Management
Apple, Inc.: Addressing The Top 5 Investor Questions
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'1".•
Katy L. Huberty, CFA — Morgan Stanley
May 29, 2019 10:28 PM GMT
Given the risk of further restrictive trade measures, we answer investors' top questions. We expect
shares to remain choppy, with a near-term floor around $160. Our estimates are unchanged but
peer multiple contraction drives our SoTP-driven PT to $231 (from $240).
What is the latest view on iPhone demand in China? On Apple's April 30th earnings call, CEO Tim
Cook noted that the November-December period was likely to be the trough in iPhone demand in
China, following an improvement in performance during the March quarter helped by iPhone price
cuts, VAT tax rollbacks, increased financing options and better consumer confidence. Data from
push-messaging service provider Jigaung shows that the improvement in iPhone demand likely
persisted through April, where Apple gained over 175bps of Chinese smartphone installed base
share Y/Y (1). However, the increasingly tough trade rhetoric and actions recently taken by US and
Chinese authorities make it less likely this trend will continue into May/June. Late last week,
following the Huawei blacklist, President Trump commented that "it's possible that Huawei would be
________included in a trade deal", suggesting recent actions could be bargaining chips to use in trade
negotiations that can be worked out by/around the G20 Summit in late June, but with Apple guiding
June quarter revenue down 8% Q/Q (vs. trailing 3 year seasonality of -14% Q/Q), the risk remains
that weaker near-term demand in China increases the risk of a revenue shortfall. For reference, we
model 37M iPhone shipments in the June quarter (-10% Y/Y), in-line with iPhone builds, which
implies a 5th consecutive quarter of double digit iPhone shipment declines in China. If we assume
Chinese demand significantly weakens in the last 6 weeks of the quarter and iPhone shipments
instead fall 50% Y/Y (a 10 point further deceleration from March Q declines), then we'd expect 2.3M
lower iPhone units (-6% vs. our current model), $1.6B lower revenue (-2.9%) and a $0.05 hit to EPS
(-2
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