Expectations are high for Apple Inc.'s quarterly results next week, in the wake of strong early sales for its new iPhone and improved sentiment on the personal computer market after Intel Corp.'s earnings.
Apple launched its third-generation iPhone 3GS in mid-June, and also slashed the price of the previous model to $99, which should contribute to healthy overall sales.
Analysts say relatively strong consumer demand for computers and lower prices on refreshed Mac laptops may also help revenue, although there is some concern about margin pressure, given recent trends in component costs.
"I think the key is that core consumer demand is there," said Hudson Square Research analyst Daniel Ernst, while noting some weakness in education, one of the company's key markets.
"There are lines for $400 phones. Clearly they're well positioned, and when the PC market comes back, we believe they're going to take significant share."
Apple's results could further bolster its stock, which has been among the top performers in technology in 2009. The shares have risen 6 percent since Intel beat expectations on Tuesday, and are up more than 70 percent this year. They trade at more than 26 times forward earnings.
Wall Street is expecting Apple to post earnings of $1.16 a share on revenue of $8.2 billion in the June quarter, according to Reuters Estimates. That would be a earnings dip of about 2 percent and a revenue increase of 10 percent from a year ago.
Analysts say the "whisper number" is likely in the low $1.20s per share for the fiscal third quarter, and note that Apple has a history of topping expectations.
The company has beat the Street's average profit estimate for the past eight quarters by a minimum of 8 percent, according to Reuters Estimates.
Apple also has a long tradition of issuing very conservative forecasts, and the September quarter should be no different.
Broadpoint Amtech analyst Brian Marshall said, "I think the guidance will be conservative for September as usual, but I think numbers are going higher. I think Apple is going to $175 here in the second half of the year."
He said potential future growth drivers include a much-rumored tablet PC and an iPhone launch in China.
Analysts expect 4.5 million to 5 million iPhone units to be sold in the June quarter, although some think Apple could handily exceed those estimates. Mac shipments are seen at 2.3 million to 2.5 million units, and iPod shipments of 10 million to 11 million.
One potential area of weakness is Apple's gross margin, given the price cuts and signs that some PC components' costs are not coming down as much as expected.
The company has forecast a gross margin of 33 percent for the June quarter, and Wall Street expects it in the 34-35 percent range. It was 36.4 percent last quarter.
Investors may also be looking for the first public words from Chief Executive Steve Jobs in some time. Jobs returned to the company in late June following a nearly 6-month medical leave, during which he underwent a liver transplant.
Jobs made an appearance on the company's conference call last October.