Wall Street loves Apple. Investors? Not so much

Despite a declining stock and a number of ominous warnings from suppliers, analysts still expect solid earnings from Apple, when the world's most valuable company reports after the bell Tuesday.

The Cupertino California-based company is expected to post revenue of $76.6 billion, up from $74.59 billion in the year-ago period, according to analysts surveyed by Thomson Reuters. Earnings are expected to be $3.24 a share, up from $3.06 a share a year earlier.

While most of Wall Street is still overwhelmingly bullish on the stock — analysts in the aggregate expect the stock to rise nearly 40 percent over the next 12 months, according to FactSet — investors apparently don't agree. Apple's shares have slid 25 percent from the company's 52-week high of $134 on April 28, and are down more than 12 percent over the past month.

At least some of that skepticism has to do with macroeconomic trends that aren't specific to Apple. The market for smartphones is extremely competitive and widely seen as at least somewhat saturated. Experts also believe that softness in China's economy could dampen demand for Apple's products. Also, many analysts see a possibility that iPhone sales decline year over year for the first time.

Given the company's heavy reliance on iPhone sales to drive revenue, analysts closely watch the number of phones sold each quarter for indications of where that market may be headed.

Goldman Sachs expects Apple to report sales of 75.4 million iPhones in the December quarter, an increase of 1 percent over last year, roughly in line with consensus estimates of 75.8 million.

But a Goldman survey of 1,000 U.S. consumers in the second week of January showed that holiday purchases of the iPhone were below the firm's original expectations, while higher prices in international markets weakened demand.

But Wall Street analysts remain undeterred. In reports to investors last week, Goldman analyst Simona Jankowski and Piper Jaffray's Gene Munster said that now is a great time to buy shares.

"We see the current weakness as a buying opportunity," Jankowski said in a note to investors on Tuesday.

Looking ahead to the expected release of a new iPhone 7 in September — Apple typically introduces a greater number of device upgrades when it transitions to a new number — Munster was equally bullish.

"We are buyers of Apple going into next week's earnings based on a belief that over the next six months the stock will react similarly to past number change cycles," he wrote in a note to investors on Thursday.

"We believe shares of Apple could achieve upside of over 50 percent from current levels by the iPhone 7 launch in September. In our view, valuation is attractive with the pullback of Apple over the past two months," he said.

Munster acknowledged that macro issues, such as falling oil prices, China's economic and currency problems and European instability are "wild cards," but he believes the setup for Apple shares continues to be favorable.

Tim Cook, CEO of Apple
Stephen Lam | Getty Images
Tim Cook, CEO of Apple

On the company's earnings call on Tuesday, analysts will be listening closely for guidance from Apple CEO Tim Cook on Apple's March quarter revenue and earnings per share expectations, as well as any commentary around China. Goldman Sachs expects Apple to guide March quarter revenues to $53 billion to $55 billion. The firm is forecasting March quarter revenues of $57.1 billion.

"Importantly, we believe the market is pricing in even weaker guidance, perhaps in the $51-53 billion range," Jankowski wrote.

Correction: An earlier version of this story misstated the number of iPhones Apple is expected to report sold this quarter.