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Here's what every major analyst expects from Apple's earnings report

Key Points
  • "The combination of negative investor sentiment, the potential for a Services acceleration in June, and a low bar for September guidance keep us positively biased into earnings," Morgan Stanley said.
  • "Apple's share price has been surprisingly resilient recently; however, with the stock trading near a peak multiple and the unresolved US-China trade overhang, we prefer to remain on the sidelines awaiting a better entry point and/or line-of sight to significant services-led EPS upside," Credit Suisse said.
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What to watch from Apple's earnings

Wall Street analysts may be suffering from a bit of malaise when it comes to Apple. The company will reports its third quarter earnings after the bell on Tuesday and analysts are advising clients to temper their expectations.

Still, analysts and investors alike will be watching for key indicators on a possible 5G iPhone, service revenue growth, and commentary on the ongoing U.S.-China trade dispute. The company is also reeling from the recent departure of chief design officer, Jony Ive.

Even so, the stock is up 31% this year just behind Facebook among the so-called FAANG stocks. FAANG is a group of internet and tech stocks: Facebook, Amazon, Apple, Netflix, and Google.

"In our opinion, investors expect fundamentals to be relatively weak heading into Apple's F3Q19 earnings despite the recent move in the stock," Bank of America analyst Wamsi Mohan said.

The feeling was mutual from analysts at UBS.

"Our conversations with investors suggest low expectations for the Q and fall iPhone builds," they said.

While expectations might be low, that doesn't mean interest isn't high, J.P. Morgan said.

"We are heading into Apple's earnings report with a higher level of investor interest relative to recent history given the confluence of softer macro but also low bar of expectations," they said.

It could also be one of Apple's most important quarters according to Bernstein analyst Toni Sacconaghi.

"Historically, Apple's fiscal Q3 results have meant relatively little to investors, whose focus by this time had typically shifted to next year's iPhone cycle," he said.

"Following Apple's volatile 2019, however, we'd argue that Q3 results will likely matter more than usual, as they could shed further light on the iPhone's health in China, price elasticity of iPhone sales, given recent price cuts in emerging markets; and /or any contraction or further elongation of iPhone replacement cycles."

Here's what else the major analysts expect from Apple's earnings report:

Morgan Stanley- Overweight rating

"Investor sentiment remains negative despite improving iPhone and Services data points, with low expectations for Sept. quarter suggesting a positive setup into earnings. We see multiple catalysts beyond earnings that make Apple a top pick into year end....The combination of negative investor sentiment, the potential for a Services acceleration in June, and a low bar for September guidance keep us positively biased into earnings. But we believe there is also a clear catalyst path beyond earnings that will help the stock re-rate towards our updated $247 price target over the next 6-9 months, making it a top pick for 2H19."

Goldman Sachs- Neutral rating

"We believe that consumer and market datapoints suggest in line to slightly weak iPhone sales in FQ3 to June and Services revenue growth in line with our forecast but below consensus. For the guide we believe Apple could upside unit expectations slightly given the earlier launch of all new models in September but we see some risk to ASP expectations given the lower priced XIR launch in September vs. late October in 2018. We continue to believe consensus expectations are high for FQ1 to December with our unit forecast 5% below FactSet consensus. We also do not see various new Services offerings driving enough additional earnings to make a material difference to Apple's slowing growth profile."

Bank of America - Buy rating

"In our opinion, investors expect fundamentals to be relatively weak heading into AAPL's F3Q19 earnings despite the recent move in the stock. Our Apple indicator projects improving trends that could drive some upside to our estimates... We maintain our Buy on stabilization in iPhones, strong capital return program, services growth, and future new products."

J.P. Morgan- Overweight rating

"We are heading into Apple's earnings report with a higher level of investor interest relative to recent history given the confluence of softer macro but also low bar of expectations. The level of interest has recently peaked given the backdrop of a softer growth outlook and with the Bears expecting continuing trade concerns to drive a softer earnings report and outlook, while the Bulls are encouraged by the likelihood of upside surprises driven by iPhone shipments bucking the softer macro through momentum of pricing actions/ promotions."

UBS- Buy rating

"Our conversations with investors suggest low expectations for the Q and Fall iPhone builds. UBS Evidence Lab data meanwhile supports general malaise in sentiment with only 19% "bullish" (down from 30% in April) and China demand/tariffs and services growth are predictably the top investor issues."

Bernstein- Market-perform rating

"Historically, Apple's fiscal Q3 results have meant relatively little to investors, whose focus by this time had typically shifted to next year's iPhone cycle – with anticipation driving seasonal outperformance in the stock. Following Apple's volatile 2019, however, we'd argue that Q3 results will likely matter more than usual, as they could shed further light on (1) the iPhone's health in China; (2) price elasticity of iPhone sales, given recent price cuts in emerging markets; and /or (3) any contraction or further elongation of iPhone replacement cycles."

Credit Suisse- Neutral rating

"While we see the potential in the longer-term shift to Services, we balance that opportunity against sizeable near-term iPhone declines ahead of a more incremental fall refresh before 5G in CY20. Apple's share price has been surprisingly resilient recently; however, with the stock trading near a peak multiple and the unresolved US-China trade overhang, we prefer to remain on the sidelines awaiting a better entry point and/or line-of sight to significant Services-led EPS upside."