This column has been updated from Oct. 11 to contain up-to-date earnings estimates, and to mention early iPhone X reviews and shipping times.
Relative to many of its tech peers, expectations for Apple Inc.'s (AAPL) - Get Report September quarter earnings report aren't especially high. But the company does need to reassure investors about where both supply and demand stand for its latest flagship smartphone, the iPhone X.
Apple, set to report on the afternoon of Thursday, Nov. 2, is expected on average by analysts polled by FactSet to post September quarter revenue of $50.69 billion (up 8% annually) and GAAP EPS of $1.87. Shares were up 0.8% to $168.14 on Thursday afternoon. Apple shares are up almost 44% so far this year.
TheStreet will be hosting a live blog analyzing Apple's Sept. quarter earnings report and investor call after the market close on Thursday. Please check our home page for more details.
Here are three key things investors will be watching:
1. Guidance, guidance, guidance
With iPhone X pre-orders starting on Oct. 27 and deliveries on Nov. 3, markets might be quick to brush off a September quarter miss. There will be more concern, however, if Tim Cook's company issues weak guidance for the seasonally big December quarter due to major iPhone X supply constraints. For now, the consensus is still for revenue to rise 9% to $85.16 billion. Quarterly iPhone sales are expected to total 46 million, flat from a year earlier.
That said, given how loyal much of Apple's customer base is, markets might be willing to also forgive a light December quarter outlook caused by supply constraints if the shortfall isn't too bad, and management signals that consumer demand for the X is very strong.
Initial reviews for the X have mostly been positive: Reviewers praise the X's design, screen and cameras, and declare that its Face ID unlocking system usually (though not always) works well. Software issues caused by the protruding notch that houses the iPhone X's TrueDepth front camera receive a bit of criticism. Meanwhile, early iPhone X shipping times are better than feared, and consumer enthusiasm for the device seems pretty healthy.
2. Margins and ASPs
With a $999 starting price, the iPhone X will clearly provide a boost to Apple's December quarter iPhone average selling price (ASP), as will the $699 and $799 starting prices for the iPhone 8 and 8-Plus. But between its edge-to-edge OLED display, 3D-sensing front-camera system and everything else, the X is also quite likely the costliest iPhone to manufacture to date.
Meanwhile, memory prices remain high, and Apple has kept not only the iPhone 7/7-Plus but also the 6S/6S-Plus around at $100 discounts to their pre-iPhone 8 prices. Apple has also cut $50 off the price of the 4-inch iPhone SE. All of this yields some interesting cross-currents for Apple's margins and ASPs. The company typically provides gross margin guidance in its earnings report; it doesn't give guidance on ASPs, but might comment on ASP trends on its earnings call.
3. iPad momentum
iPad sales were surprisingly healthy in the June quarter, with revenue rising 2% annually and unit sales 15% on the back of strong demand for the low-cost 9.7-inch tablet (it's just called the iPad, and starts at $329) that Apple launched in March. Apple's report on Thursday will let us know how much the June launch of two new iPad Pro models, including a 10.5-inch model that has a form factor similar to its 9.7-inch predecessor, served to keep the iPad's momentum going.
The consensus is for iPad revenue to be up 3% to $4.4 billion, with unit sales of about 10 million. Of note: For its latest iPad Pros, Apple has been heavily promoting iOS 11 multitasking features meant to make the tablets more effective notebook substitutes. But those features, like the rest of iOS 11, didn't roll out to users until mid-September.
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