Wall Street is bracing for lackluster earnings when Apple reports on Tuesday.
The good news for Apple is that low expectations are largely built in, say analysts.
The company is expected to report fiscal third-quarter earnings after Tuesday's closing bell of $1.38 per share on $42.11 billion in revenue, according to analysts surveyed by Thomson Reuters.
That revenue figure would represent a 15 percent decline from the comparable year-ago period and an even greater year-over-year decline in revenue than the company reported in the prior quarter.
Last quarter Apple missed analyst estimates — reporting a roughly 13 percent decline in revenue from the year-earlier period and marking its first quarter-over-quarter revenue decline since 2003 — and investors punished the stock. Shares tumbled in after hours trading, eviscerating more than $46 billion in market capitalization.
But don't expect a repeat performance.
The stock is already trading toward the low end of its 52-week historical price range and at the bottom of the range for mega-cap tech stocks. (Apple closed around $99 on Friday.)
Apple has missed earnings estimates just four times since the introduction of the iPhone in 2007, with each miss pushing the stock down an average of 3.85 percent the week following the report, according to Kensho. The company has not missed in consecutive quarters since 2012, and has beat earnings expectations more than 68 percent of the time.
Investor sentiment of late has been so negative that if Apple reports in-line results and fourth-quarter guidance, that could be enough to drive shares higher, Pacific Crest analyst Andy Hargreaves said in a report to investors last week.
"This would likely serve as a relief to investors who are concerned about continued deterioration in the pace of iPhone sales through the iPhone 7 cycle," Hargreaves wrote. Pacific Crest has an overweight rating on the stock and a $121 price target.
Colin Gillis, an analyst at BGC Partners, is only growing more pessimistic. He slashed his rating on Monday, and now recommends investors sell the stock on concern that consumers aren't upgrading their iPhones.
Of course, Apple's revenue is closely tied to the number of iPhones it sells, and fiscal third-quarter sales are typically weak. Analysts on average expect Apple to report it sold 40 million iPhones in the quarter, a 17 percent reduction in sales from the quarter a year earlier.
"We believe revenue could come in slightly below consensus on a challenging smartphone environment," Mizuho Securities analyst Abhey Lamba said in a note to investors last week. "However, downside is largely expected at this point." Lamba has a buy rating on the stock and a $120 price target.
"Volatility in the name has been driven by slowdown in the smartphone market and uncertainty around shipment volume from China amid heightened competition," Lamba wrote.
Last quarter, Greater China sales — once Apple's fastest growing market — slid to $12.49 billion, a 26 percent year-over-year decline. But it is unlikely that rising competition is to blame for the iPhone's slowing growth in China, said Piper Jaffray analyst Gene Munster. He cited economic uncertainty as the likely the cause. Munster expects fiscal third-quarter sales of the iPhone in China to be roughly flat, and overall iPhone sales to be down 16 percent from the year-earlier period.
"In some ways, China will be a positive for the overall iPhone business," he said. "But in other ways, it's not that same magical growth that they've had over the past few years in China."
Growth in the Chinese smartphone market overall is expected to slow to low single digits this year, putting it on a par with other mature markets like the U.S. and Western Europe, according to International Data Corporation. Still, with less than 10 percent of that market — compared with roughly 18 percent globally — Munster sees a big opportunity for Apple in China.
"We're still bullish on China," he said. "We think that China is still the best growth market in the world over the next five years and we think Apple is going to continue to increase their market share."
Apple is expected to release its next generation smartphone — the iPhone 7 — in early September. Next quarter, analysts expect the company to report sales of 48 million iPhones, and an 11 percent decline in revenue year over year.
Though it is unlikely Apple executives will provide any information on new product features, analysts will be looking for related commentary on the company earnings conference call. Lengthening upgrade cycles — consumers waiting longer to purchase new devices — is particularly of interest, Stifel Nicolaus analyst Aaron Rakers said in a note to investors last week. Verizon has said it expects the rate of upgrades to slow this year, said Rakers, who has a buy rating on Apple's stock with a $120 price target.
The iPhone 7 may not generate as big of a bump in sales as prior new iPhone launches — the device's updates are expected to be limited, and some consumers may wait for next year's 10th anniversary model, said Munster, who has an overweight rating on the stock and a $153 price target.
"Ultimately, these near-term numbers don't matter, and what matters more is that over the next three quarters iPhone is going to return to growth, and that should be a positive to the multiple and positive for Apple's stock," said Munster.
Munster doesn't expect the iPhone to return to growth until the December quarter. He estimates that over 275 million iPhone units in the market are more than 2 years sold and that those Apple customers are highly likely to upgrade to an iPhone 7.
He sees Apple as a long-term growth story, as the company lays on services and expands its wearables business.
Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.