Apple earnings preview: AAPL likely to boost buyback, dividend, but eyes will be on the iPhone
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Apple (NASDAQ:AAPL) is set to report fiscal second-quarter earnings after the close of trading on Thursday and while investors may receive some good news in the form of an increased dividend and stock buyback, all eyes will be on the health of the iPhone.
J.P. Morgan analyst Samik Chatterjee, who recently cut Apple's (AAPL) price target to $205 per share, down from $210, noted that weaker consumer spending due to rising inflation could impact iPhone sales.
"We are moderating our iPhone unit outlook to 235 million for [2022] (vs. 245 million prior), including 55 [million] in [first-quarter] (vs. 60 million prior)," Chatterjee wrote in a note to clients.
The analyst recently lowered iPhone estimates due to weak interest in the iPhone SE with 5G, but he added that higher market share could help the tech giant.
A consensus of Wall Street analysts expects Apple (AAPL) to earn $1.43 per share on $94 billion in sales.
Bank of America analyst Wamsi Mohan, who rates Apple (AAPL) shares buy with a $215-per-share price target, noted that the buyback could be $70 billion or more and the dividend could be raised by 5%.
However, it's the company's iPhone sales and its prospects in China that are making the analyst cautious in the near-term.
"Heading into the quarter, we see some near-term risk from COVID-related shutdowns in China, lower App Store sales and FX," Mohan wrote in a note to clients, adding that the company has "significant catalysts" ahead of it, including the ability to better monetize its user base, advertising related revenue growth, the continued growth in Services and "opportunity in Augmented/Virtual Reality." 
Morgan Stanley analyst Katy Huberty, who rates Apple (AAPL) overweight, said it's likely that the tech giant could beat Wall Street revenue estimates, due in part to strength in the iPhone 13 and Mac, but weakness may crop up from the iPad and Services. 
"We expect Apple to post upside to March quarter consensus revenue estimates on the back of iPhone 13 and Mac strength, which we believe more than offset relative weakness in iPad and the App Store in the quarter," Huberty wrote in a note to clients.
The analyst also expressed caution for the upcoming quarter, due in large to China's COVD-related lockdowns that are sweeping the country. 
"With COVID-related lockdowns currently spreading through major Chinese manufacturing hubs such as Shanghai, Kunshan, and Zhengzhou - albeit with limited impact to Apple production schedules to date - we expect Apple to take a more cautious stance when providing commentary on the June quarter given the unpredictable nature of potential future lockdowns," Huberty explained, adding that the Wall Street forecast of $86.7 billion in revenue for the June quarter may be too high.
On Monday, Wedbush Securities said the results from Microsoft (MSFT) and Apple (AAPL) "could dictate the path of tech stocks over the coming months."