EFTA02529389

From: Richard Kahn < Sent: Thursday, February 8, 2018 12:40 PM To: Jeffrey Epstein Subject: Fwd: AAPL US: Apple Inc. - Attractive in volatile markets, cash cushion like none other - BUY Richard Kahn HBRK Associates =nc. 575 Lexington =venue, 4th Floor New York, NY =0022 Begin forwarded message: From: =/b>"Ens, Amanda" < Subject: =/b>AAPL US: Apple =nc. - Attractive in volatile markets, cash cushion like none other - =UY Date: =/b>February 8, 2018 at 7:28:50 AM =ST To: =Th>"rkahne Reply-To: qb>"Ens, Amanda" < I believe you still =wn? Let me know if you'd like to discuss further. Global =esearch Apple Inc. Attractive in volatile markets, cash cushion like =one other Reiterate Rating: BUY PO: 220.00 =SD I Price: 159.54 =SD Equity I 08 February 2018 EFTA_R1_01671539 EFTA02529389 Key takeaways • Apple =s a defensive stock to own given derisked expectations, a strong cash =osition and incremental capital return Shares =re currently discounting declining growth in hardware scenario and a =orse than run rate trajectory for Services rev Our =CF based upside/downside scenarios are $232/$141 which represents =rowth/decline of 42%/13%. <=, class="MsoNormal" style="margin: 0in Oin 0.0001pt; padding: Opx; =ine-height: normal; font-size: 12pt; font-family: 'Times New Roman', =erif;"> FULL REPORT A =ame to own in volatile market conditions In =imes of market turmoil, we turn to large cap stocks with low leverage, =igh cash balance, and attractive valuation. Apple offers all this as =ell as opportunities for future growth. Apple's large cash balance =ffers the opportunity to expand into new markets (Fig 1). Capital =eturn program remains strong (Fig 2) and we expect the company to =nnounce a new authorization in the April timeframe (could be higher =han the typical annual $30-50bn given cash repatriation), and we =lready model a 10% dividend increase in 2018. While iPhone X sales may =e lower than the Street had predicted (our estimates were lower) we =iew low single digit unit growth and mix adjusted ASP (average selling =rice) growth into 2019, with upside to gross margins. In addition, =ervices remain a key growth driver in future years. Reiterate =uy. Balance Sheet and FCF remains =trong Apple's balance sheet =emains strong with -$32/sh in net cash and investments =t the end of F1Q18. We expect continued strong free cash flow (FCF) of =bout $50-60bn, per year, over the next two years despite higher capex =announced plans to spend $30bn in capex in the US over the next five =ears. Total capex in F18 expected to be =$16bn). Buybacks continue, capital return program =trong So far, Apple has completed =ver $248bn of its $300bn capital return program, including $176bn in =hare repurchases against its $210bn buyback program. We estimate =pproximately $34bn remains under Apple's current =uthorization. Valuation even more attractive after recent =ullback 2 EFTA_R1_01671540 EFTA02529390 AAPL shares are down —5% YTD =nd —10% from N/T peak of $179. Our detailed note on Apple =ervices revenue showed that shares are currently discounting a =declining growth in hardware" scenario and a worse than run rate =rajectory for Services revenues, which is to us too pessimistic. Our =CF analysis leads us to Bull/Bear case scenarios of $230/$141 (Fig 3) =or Apple shares. Next catalysts for the stock would be announcement of =ew buyback authorization (April) and earnings and WWDC in the summer of =018. Wamsi Mohan <=span> Research =nalyst MLPF&S This report is intended for <mailto Click here <http://researchlibrary.bankofamerica.com/> to access the Research Library Read the research report, available =hrough the link above, for complete information including important =isclosures and analyst certification(s). The research report and the link to such =eport are for the use of Bank of America Merrill Lynch customers only =nd all copying, redistribution, retransmission, publication, and any =ther dissemination or use of the contents thereof are prohibited. There =ay be more recent information available. Please visit one of the =lectronic venues that carry BofA Merrill Lynch Global =esearch reports or contact your Bank of America Merrill Lynch =epresentative for further information. "Bank of America Merrill Lynch" =s the marketing name for the global banking and global markets =usinesses of Bank of America Corporation. Click here to stop or =odify the delivery of Research via Emails. Publication: 62651343-11839542.pdf Recipient: http://rsch.baml.com/r?q=0W9oMugd5imuUk5uB!L5cQ&e=rkahn=40hbrkassociates.com&h=qPr3uO This message, =nd any attachments, is for the intended recipient(s) only, may contain =nformation that is privileged, confidential and/or proprietary and =ubject to important terms and conditions available at http://www.bankofamerica.com/emaildisclaimer. If you are =ot the intended recipient, please delete this message. 2582804 3 EFTA_R1_01671541 EFTA02529391 4 EFTA_R1_01671542 EFTA02529392