Wall Street waits for a bite of Apple ahead of quarterly results

The iPhone maker said that first-quarter sales, which includes the holiday season, would be lower than anticipated, in large part because of a slowdown in the Chinese economy. China accounts for roughly 15% of total sales.

The stock tumbled on the announcement, with around $50bn wiped off its value immediately afterwards. However, it has since stabilised and is now trading at $153, close to pre-profit warning price.

Analysts are hoping that all the bad news has already been published, and the results – due after the close on Tuesday – will contain no further shocks.

Neil Wilson, chief market analyst at Markets.com, said: “The big question facing investors is whether all the downside has already been priced in and whether Apple still has some skeletons from the last quarter. And, as ever, what will really matter to the market is guidance for the March quarter as a base for the rest of the year.”

He added that Mac and iPad sales were likely to have fared better than iPhones, and that the services arm was continuing to grow.

“The shift to a services business continues, which ultimately should command higher multiples,” he argued. “We note that the installed base of devices has risen to 100m in the last 12 months. Investors are yet to really buy into the idea that Apple can be a services business, so the inclusion of margin details on this division will be very interesting in terms of how the market reads it.”

This will be the first quarter Apple discloses margins for the services arm.

RBC Capital Markets, which has an ‘outperform’ rating on the stock and a price target of $185, said investor sentiment remained muted “due to concerns around iPhone, including China slowdown, elongating replacement cycles given maturity, high average selling prices and limited innovation”.

But it continued: “With $126bn+ in net cash, we believe the stock is undervalued. From a product perspective, we believe the company can continue to gain share in both the tablet and smartphone space.

“We believe Apple’s current stock price creates an attractive entry point for investors. We believe multiple catalysts remain, as the company benefits from strong services segment growth, capital allocation, robust growth in wearables and potential gross margin improvement.”

UBS, which has a ‘buy’ recommendation and a $180 price on a 12-month view, said it expected revenues and earnings per share of $83.8bn and $4.14, in line with Apple's revised guidance.

Looking to the second quarter, UBS is targeting revenues of $56.2bn and EPS of $2.43 on lower iPhone units. UBS has pencilled in sales of 41.5m iPhones, against a more bullish consensus estimate of 45m. Apple has announced that it will no longer break down unit sales for the iPhone.

“A key question is how average selling price holds up, given a clear need to reduce channel pricing due to flagging demand and currency pressures,” UBS added.