Apple's iPhone sales in the June quarter will significantly disappoint versus Wall Street expectations, according to Morgan Stanley.
But the firm says any drop in the stock from poor results will be a great buying opportunity.
Morgan Stanley lowered its June quarter iPhone unit estimate to 34 million from 40.5 million versus the nearly 43 million average forecast.
"We expect Apple to report an in-line March quarter, but are cautious into earnings on May 1 due to our belief that June quarter consensus estimates need to be revised lower," analyst Katy Huberty wrote Friday in a note to clients entitled "Cautious Into The Print; Buy Any Post-Earnings Dip."
"Additionally, with expectations for a step up in capital returns at least partially embedded in valuation … Apple's capital return announcement could amount to a 'sell the news' type of event, especially if forward estimates are revised materially downward."
The company's stock closed down 4.1 percent Friday.
Huberty cited her poor checks with Apple's iPhone suppliers and weaker-than-expected data from China for her estimate reduction. She noted Apple's smartphone activation share fell in China so far this year through March.
Despite her negative iPhone forecast the analyst reiterated her overweight rating on the company's shares, saying investors should add to Apple positions in any post-earnings stock decline.
"We would be buyers on any weakness following the print given 1) the Services story remains intact, (leading to a stronger and more consistent source of EPS growth and margin expansion), 2) estimate revisions are approaching trough (we already assume no device revenue growth next three years), and 3) buybacks remain a source of downside protection."
Huberty lowered her price target to $200 from $203 for the company's stock, representing 16 percent upside from Thursday's close.
On Thursday Bank of America Merrill Lynch and J.P. Morgan warned their clients that iPhone sales may come in below expectations after key Apple chip partner Taiwan Semiconductor Manufacturing (TSMC) lowered its sale guidance. TSMC cited "weak demand" in the smartphone industry for its reduced forecast.
TMSC is the world's largest semiconductor foundry and manufactures chips for Apple and its component suppliers.
Apple did not immediately respond to a request for comment.