How many iPhones will Apple Inc. (NASDAQ:AAPL) sell during the holiday quarter? Of course it depends on who you ask. Canaccord Genuity analyst Michael Walkley is estimating 51 million, while Stifel analyst Aaron C. Rakers and the rest of his team are estimating 54 million. Clearly expectations are running high for Apple Inc. (NASDAQ:AAPL) in the December quarter.

Apple iPhone 5s

Analysts bullish on Apple’s new iPhones

There have been indications that Apple Inc. (NASDAQ:AAPL) has been increasing production of the iPhone 5S in order to meet high demand for it. Estimates for just how much the 5S has been outselling the 5C range from Walkley’s estimate of two and a half to one to Rakers’ estimate of three to one.

In last night’s earnings report, Apple Inc. (NASDAQ:AAPL) did prepare investors and analysts for what may appear to be a flat holiday quarter. The company is deferring an extra $5 per iOS device, bringing that amount from $15 to $20 per device that will be deferred from the holiday quarter. For each Mac, the company will now defer $40.

Apple’s guidance was neutral to positive

According to Rakers and his team, Apple Inc. (NASDAQ:AAPL)’s December quarter guidance was neutral to a modest positive. The company guided for revenue of between $55 billion and $58 billion and a gross margin of 36.5% to 37.5%. The company also said it expects operating expenditures of between $4.4 billion and $4.5 billion and a tax rate of 26.25%.

Rakers now estimates Apple Inc. (NASDAQ:AAPL)’s December quarter will bring $57 billion in revenue and $13.92 per share in earnings. He adjusted his fiscal 2014 estimate from $174.8 billion and $40.94 earnings per share to $180.72 billion and $42.54 per share.

Apple’s gross margins stabilize

The Stifel team also noted that Apple Inc. (NASDAQ:AAPL)’s gross margins appear to be stabilizing, which is important for investors. The company’s September margins were 37%, which was in line with its own expectations. Those margins included a negative impact from the increase in deferred revenue, which is related to the decision to offer free upgrades for OS X Mavericks and free iLife and iWorks apps.

In addition, Apple Inc. (NASDAQ:AAPL) reported that it will see a higher iPad mix with bigger costs during the December quarter. It also sees problems from the negative impact of the yen and higher costs for the iMac and MacBook Pro computers. Rakers said in general, guided margins of 36.5% to 37.5% were a net positive for Apple Inc. (NASDAQ:AAPL) because it has been struggling to stabilize them.

What about China?

Analysts will also be keeping an eye on Apple Inc. (NASDAQ:AAPL)’s progress in China. Walkley of Canaccord Genuity continues to expect a deal between Apple Inc. (NASDAQ:AAPL) and China Mobile Ltd. (ADR) (NYSE:CHL) (HKG:0941) by early next year, while Stifel notes that the company did return to growth there but suggests the results may not be good enough.

Greater China revenue was $5.733 billion, a 5% increase year over year and a 31% sequential increase. The Stifel team investors should continue to question Apple Inc. (NASDAQ:AAPL)’s underperformance in China over the last two quarters. They noted an interesting correlation between estimated iPhone shipments to China compared with the combined China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) and China Telecom Corporation Limited (ADR) (NYSE:CHA) non-services revenue over the last few years. The Stifel team questions why there is a sudden disconnect between these numbers in the last two quarters and said they’ll be watching this.

Apple China unicom