Here's what every major analyst expects from Apple's second quarter earnings

Published Sun, Apr 25 20218:34 AM EDTUpdated Sun, Apr 25 20212:53 PM EDT

Wall Street analysts are largely focusing on the iPhone ahead of Apple' s second quarter earnings report on Wednesday after the bell. The tech giant has largely done well during the pandemic driven by high demand of products like the Mac and iPad. In addition, the company debuted several updated products last week. But now supply chain questions are emerging over the iPhone as well as sales in China. Shares of the company are only up 1.2% this year. Investors will also be watching to see if the company provides guidance, which it has declined to do since the coronavirus began. Buybacks and dividend hikes are other key catalysts to watch closely, according to analysts. Here's what analysts expect from the company's earnings report: "The set-up into the upcoming earnings print is dramatically different from the last one with the focus on near-term earning drivers having significantly moderated post the peak holiday sales quarter," JPMorgan analyst Samik Chatterjee wrote. The firm said it was concerned about slowing iPhone sales, as well as what it called a "softening" trend in China. Nevertheless, the bank stood by its overweight rating. At Wells Fargo, analyst Aaron Rakers reiterated his overweight rating, but also admitted to some uncertainty. Rakers noted that any upside would likely be derived from the company's "continued strength" in Mac and iPhone sales. "While we see ongoing positive demand drivers, based on our analysis of various intra-quarter data points, we're reluctant to make a meaningful upside call ahead of the forthcoming earnings release" he said. The feeling was similar for Goldman Sachs analyst Rod Hall. "As we approach earnings, we believe that how Apple beats numbers this quarter is more important than whether it beats," he wrote. Hall said his firm would wait for more information, but would also be scrutinizing the iPhone data carefully. "In our opinion, current high levels of both iPad and Mac demand are unlikely to be sustainable as the world reopens, so another beat driven more by these areas may not be enough to drive the shares further," he said. Meanwhile, despite the success of the iPhone, the stock's valuation is just too rich, according to investment firm Bernstein. "While Apple's stock has underperformed by 1000+ bps YTD, and the stock's historical pattern points to material outperformance in advance of new iPhone launches, we struggle to recommend that investors overweight the name," analyst Toni Sacconaghi said. But Morgan Stanley analyst Katy Huberty expressed a more upbeat view than many of her peers in her recent preview note to clients. Huberty said said the stock was poised to re-rate, bolstered by the company's latest product announcements. "High confidence in March quarter beat as ecosystem strength set to shine," she wrote. JPMorgan - Overweight rating "The set-up into the upcoming earnings print is dramatically different from the last one with the focus on near-term earning drivers having significantly moderated post the peak holiday sales quarter. With feedback from the supply chain indicative of iPhone builds moderating, led by the softening trend for smartphone sales in China as well as slowing momentum of 5G iPhone sales, we believe investor expectations are primed for softer results relative to sell-side consensus." Wells Fargo - Overweight rating "While we see ongoing positive demand drivers, based on our analysis of various intra-quarter data points, we're reluctant to make a meaningful upside (iPhone-driven) call ahead of the forthcoming earnings release. That said, we see continued strength in Mac and iPad sales driven by COVID-induced WFH/education demand, continued solid double-digit services growth, and in-line/slightly better iPhone sales with some potential upside driven by richer mix, in our opinion. Wedbush - Outperform rating "Importantly, with our estimation that 350 million of 950 million iPhones worldwide are currently in the window of an upgrade opportunity, we believe is translating into an unprecedented supercycle upgrade cycle for Cook & Co. Geographically speaking, demand in China looks strong coming out of the Chinese New Year and remains a linchpin to our Apple bull thesis." Evercore ISI - Outperform rating "We are adding Apple to our Tactical OP list as the company looks well positioned to report upside to Mar-qtr estimates driven by iPhone and Services strength despite the ongoing supply disruptions. While the supply chain issues are real, we expect Apple will be relatively protected by its status as one of the largest electronics purchasers in the world. ... AAPL is positioned to report sizable upside vs. expectations for March-qtr and guide June-qtr inline to somewhat ahead of expectations." Citi - Buy rating "Our checks continue to suggest underlying demand fundamentals across consumer tech demand and App Store remains robust, App Store momentum also continues while we view the regulatory concerns as headline risk which are unlikely to be resolved soon. Capital returns likely to be in focus during this earnings call. Looking ahead, we believe Apple's shares as attractive given the revenue diversification, unique product + service set, strong cash flow generation, potential to enter other large [total addressable markets] and shareholder returns." Monness Crespi Hardt - Buy rating "During this crisis, we believe Apple has enhanced its value proposition in the eyes of people around the world by introducing new innovations, supporting a more digital lifestyle, and attracting new consumers to Planet Apple. ... This COVID-19 crisis has created havoc across multiple industries, resulting in an uncertain future, creating a greater allure for large, well-managed, tech companies with strong balance sheets that benefit from digital transformation, such as Apple." Bernstein - Market perform rating "Despite reports of production cuts, we believe that the iPhone cycle is tracking well, and we model above normal seasonality for FYQ2, with revenues of $80B, largely driven by iPhone. ... It is unclear whether Apple will provide "guidance" or "guidelines" for FY Q3, but we suspect it will lean to the latter. ... While Apple's stock has underperformed by 1000+ bps YTD, and the stock's historical pattern points to material outperformance in advance of new iPhone launches, we struggle to recommend that investors overweight the name. Goldman Sachs - Sell rating "As we approach earnings we believe that how Apple beats numbers this quarter is more important than whether it beats. In our opinion, current high levels of both iPad & Mac demand are unlikely to be sustainable as the world re-opens so another beat driven more by these areas may not be enough to drive the shares further." Morgan Stanley - Overweight rating "High confidence in March quarter beat as ecosystem strength set to shine. We see a positive setup into Apple's F2Q21 earnings report next Wednesday and believe that a strong beat and raise March quarter combined with more muted institutional inventor positioning relative to F1Q earnings will help AAPL shares re-rate after YTD underperformance." Deutsche Bank- Buy rating "AAPL's stock has been up only +1% YTD compared to the S & P at up +11%, as we believe there has been a modest pull-back in investors' expectations for the smartphone market in CY21. Our industry and supply chain checks, however, have indicated that CY21 smartphone units and particularly 5G units are continuing to trend well for the year, with minimal excess inventory built in the supply chain. We also think demand for the iPhone remains solid due to the delayed launch last year and AAPL continues to benefit from share gains in the high end market."

Apple CEO Tim Cook delivers the keynote address during the 2020 Apple Worldwide Developers Conference at Steve Jobs Theater in Cupertino, California, on June 22, 2020.

Brooks Kraft | Apple, Inc. | via Reuters

Wall Street analysts are largely focusing on the iPhone ahead of Apple's second quarter earnings report on Wednesday after the bell.

The tech giant has largely done well during the pandemic driven by high demand of products like the Mac and iPad. In addition, the company debuted several updated products last week.

But now supply chain questions are emerging over the iPhone as well as sales in China.

Shares of the company are only up 1.2% this year.

Investors will also be watching to see if the company provides guidance, which it has declined to do since the coronavirus began. Buybacks and dividend hikes are other key catalysts to watch closely, according to analysts.

Here's what analysts expect from the company's earnings report: