Gene Munster: Expect More iPhone Momentum In Apple's Earnings

In a report issued Sunday, Piper Jaffray analysts Gene Munster and Douglas J. Clinton previewed Apple Inc. AAPL’s second quarter financial results, which will be reported after the market closes on Tuesday.

The experts expect to see continued strength in iPhone unit growth in the second quarter, with slight acceleration from the first quarter; and this should be positive for shares.

Additionally, they think the high-end of the company's guidance (“which is the true guide,” they say) will be in-line with the Street's third quarter estimates. Heading into the second half of the year, the analysts anticipate investor focus will begin to be on “what the incremental improvements will be for the iPhone 6S and how the new device will perform vs tough comps, impact of native apps, and a potential video streaming launch.”

What To Expect For Q2

After chatting with approximately 20 investors, the firm believes what they expect is:

- Earnings of $1.82 per share

- Revenue around $50 billion

- Gross margin of 39.5 percent

- iPhone sales of 49-50 million units (versus the Street’s expectations, around 48 million). This figures imply 39 percent year-over-year unit growth.

- Revenue guidance in the $48 billion - $51 billion range, versus the Street's consensus of $51 billion. This implies 48-49 million iPhones sold.

- Gross margin guidance in the 39 percent – 40 percent range.

iPhone Estimates

The aforementioned expectations for iPhone sales imply that iPhone growth is accelerating, the note expounds. “This acceleration reflects iPhone gaining share at the high-end of the market, a trend that we expect to continue throughout 2015,” the experts add.

Related Link: Oppenheimer Says Apple Quarter Will Be Robust, Fears Are 'Overblown'

On the other hand, however, it is well known that comps start decelerating in the fourth quarter of the year. This will likely “soften investor optimism around iPhone share growth.”

The firm is modeling for 17 percent iPhone unit growth in 2015 and flat iPhone sales growth in 2016.

Piper Jaffray maintains an Overweight rating and $162.00 price target on shares of Apple, which are up almost 2 percent on Monday trading, ahead of the earnings report.