Updated from 9:48 a.m. to include thoughts from Wells Fargo analyst.
As is now the case with Apple, guidance is the key, given the company has changed its reporting methodology in the past few quarters, as it becomes a more mature tech company, and is no longer the hyper-growth company it was just a few years ago. When Apple reported fiscal first-quarter earnings, it gave second-quarter guidance, saying it expects revenue between $42 billion and $44 billion, with margins between 37% and 38%, and operating expenses between $4.3 billion and $4.4 billion, with a 26.2% tax rate.Analysts surveyed by Thomson Reuters are expecting the Cupertino, Calif.-based Apple to report earnings of $10.18 a share on $43.53 billion in revenue, which would be a slight decline in revenue year over year, as Apple continues to promise new products and new categories. Morgan Stanley analyst Katy Huberty (who always gets to ask the first question on the call, must be nice!) noted that demand for the iPhone was better-than-expected this quarter, noting demand for over 40 million iPhones. "Our AlphaWise smartphone tracker, which gathers sell-through data using web search analysis, indicates 40.6M unit demand for the Mar Q," Huberty wrote in the note. "This is down slightly from a reading of 42.3M for the quarter in mid-March but still above supply chain build of 38-39M, which is unchanged in the last month. Recent promotions, like those at US carriers and retailers, and product adjustments, notably the introduction of an 8GB iPhone 5c in some regions, may have stimulated demand more than expected." Based on that, she's expecting Apple to have shipped 38 million iPhones for the quarter. Cantor Fitzgerald analyst Brian White, he of the $777 price target, noted there were weaker-than-expected seasonal trends for the fiscal second-quarter, due to "softness in the tech supply chain." As such, he's expecting a 25% sequential decline in revenue, down to $43.24 billion, but White is hopeful about the company's new products, including the next iPhone, dubbed the iPhone Air by some. "In our view, the ramp of the iPhone 6 (4.7-inch and 5.5-inch "iPhad"-like device) and iWatch in the second-half of CY:14 are more important than Apple's 2Q:FY14 performance and potentially soft 3Q:FY14 outlook," White wrote in the report. "We also expect Apple to increase its return of cash to shareholders and the stock is trading at just 7.7x (ex-cash) our CY:15 EPS projection." Though Apple guided revenue for this quarter to between $42 billion and $44 billion, there's still a bit of an unknown, as Apple's deal with China Mobile (CHL) officially launched during the quarter, perhaps giving bulls a bit of hope that iPhone numbers may be stronger than anticipated. Following China Mobile's announcement of annual earnings, which saw the company's first profit decline in more than a decade, the world's largest carrier said it added around 1 million iPhones in February, according to The Wall Street Journal. China Mobile's Chairman Xi Gouhua told the paper that the company, which has more than 770 million subscribers, added 1.34 million 4G users in February, and "most of them are iPhone users."
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