What To Expect From Apple's Q2 Earnings - Apple (NASDAQ:AAPL)

Apple Inc. AAPL is scheduled to report its second-quarter earnings Tuesday afternoon. Consensus estimates call for earnings of $2.69 per share on revenue of $60.9 billion.

Here is a summary of what some of the Street's top Apple analysts are saying ahead of the print.

The Analysts

Barclays' Mark Moskowitz maintains an Equal-Weight rating on Apple with a price target lowered from $168 to $157.
Oppenheimer's Andrew Uerkwitz maintains a Perform rating on Apple with no price target.
Bernstein's Toni Sacconaghi, Jr. maintains a Market Perform rating on Apple with a $170 price target.

Barclays

Heading into Apple's report, it's clear the iPhone mega cycle investors had hoped for "didn't happen," Moskowitz said in a research report. Meanwhile, the iPhone is seeing "mixed" demand highlighted by strong user loyalty but with a "moderation" in overall iPhone momentum.

The analyst models the following for Apple's March ending quarter:

Revenue of $57.802 billion (down from prior estimate of $59.466 billion).
iPhone units of 48.323 million (down from 49.792 billion).
iPhone average selling price of $745 (down from $752).
Services revenue of $8.674 billion (up from $8.64 billion).
EPS of $2.56 (down from $2.61).
Free cash flow of $8.975 billion.

Oppenheimer

There are multiple reasons to be remain bearish, Uerkwitz said in a research report. A bearish stance on the stock isn't appropriate, however, given expectations for the company go generate more than $60 billion in free cash flow per year through fiscal 2020.

Granted, investors can find "mounting" evidence to conclude Apple has a growth problem but it would also be reasonable to conclude Apple is a "victim of its own success," the analyst said. Apple Music and the Apple Watch boast subscribers in the tens of millions, but at the same time penetration of these newer products and services in the current Apple installed base stands at a low-single digit. As such, investors could reasonably conclude Apple's ecosystem is "not compelling enough to counter structural issues and expand niche categories" and also "bad for growth."

Apple's failures to drive penetration of new services and hardware products among the iPhone installed base is "the most concerning problem," Uerkwitz said. Accordingly, the company is showing "cracks" in the medium to longer-term but this is countered by a "high and stable" market share in developed markets coupled with an ongoing "large" capital return story.

Bernstein

Despite iPhone estimates coming down in recent weeks, Apple still holds "two wildcards" to support its earnings, Sacconaghi said in a research report. First, the company can allocate more capital towards incremental buybacks, and second, a new product announcement like the iPhone SE 2 could excited investors. On the other hand, bears would counter and argue that increased stock buybacks and a new iPhone SE 2 aren't sufficient enough to offset the weak iPhone X and 8 cycle that's structurally challenged.

Taking the bull and bear point of view, the analyst said the risk-reward profile for Apple's stock ahead of Tuesday's report is "neutral to slightly negative." Accordingly, it's more like that the Street's estimates will move lower than higher in the near-term.

The key question moving forward is if the iPhone business can in fact grow over time, according to Sacconaghi.

Apple's stock closed Monday at $165.26. Shares are down 4 percent in 2018.

Be sure to listen to Benzinga's PreMarket Prep trading show on Wednesday morning from 8-9 a.m., when Piper Jaffray's Mike Olson and Loup Ventures' Gene Munster will break down the earnings report.

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