Apple is scheduled to release its next earnings report on Monday after closing bell. It will be an especially interesting report because not only is the March quarter usually seasonally slow, but analysts are building up expectations for an upside surprise in iPhone unit sales.

Apple Inc. (AAPL) Earnings Preview: Eyes On The iPhone

Deutsche Bank increases price target

Ahead of Monday’s report analysts Sherri Scribner and Larry Zhong of Deutsche Bank raised their iPhone unit estimates and price target for Apple Inc. (NASDAQ:AAPL). They’re now expecting the company to report sales of 60 million iPhones, up from their previous estimate of 55 million. They also bumped up their price target from $110 to $125 per share but maintained their Hold rating on Apple Inc. (NASDAQ:AAPL) stock because think the valuation is “fair at current levels.”

The Deutsche Bank team said their checks suggest the March quarter brought another strong quarter of upgrades for the iPhone 6 and iPhone 6 Plus. They believe even their new estimate of 60 million iPhones could end up being conservative, but they expect the upgrade cycle to start coming to an end as we move through the June quarter.

They also believe that the next upgrade cycle starting in the fall with the iPhone 6S will be weaker because Apple and Samsung have already deeply penetrated the high-end smartphone market. As a result, the high end of the market will see more limited growth going forward.

How many iPhones?

Analysts from pretty much every firm have released their estimates for iPhone sales. Morgan Stanley’s Katy Huberty, who is usually on the more bullish side, estimates 57 million to 58 million units for the March quarter. She has an Overweight rating and $160 per share price target on Apple Inc. (NASDAQ:AAPL).

Stifel analyst Aaron Rakers and his team also bumped up their iPhone estimate, pushing it from 53.6 million to 59.9 million units for the quarter. They believe China represents the biggest “swing factor” in determining just how much upside can be seen for Apple in the March quarter.

They note that in the December quarter, there was a year over year increase of two times for iPhone sales in China

Any more catalysts ahead?

The Deutsche Bank team also mentioned the Apple Watch, saying that they don’t think it will “materially” impact Apple Inc. (NASDAQ:AAPL)’s results until the 2016 fiscal year. They note that the watch did not go up for preorder until April, so there were no sales of it during the March quarter.

Hubert, on the other hand, does see some potential catalysts. She mentions the Apple Watch as a catalyst and expectations for new services that are rumored but have not been announced, like streaming music and TV services.

What to expect in Apple’s (AAPL) earnings report

Apple Inc. (NASDAQ:AAPL) guided for between $52 and $55 billion in revenue and gross margins of between 38.5% and 39.5%. Huberty estimates $54 billion in revenue and $2.07 per share in earnings for the March quarter. She expects a gross margin of 39.7% and believes Apple could present “modest” beats on these metrics compared to their guidance. She pointed out that in the last nine quarters, Apple Inc. (NASDAQ:AAPL) exceeded the high end of its revenue guidance in the low single digit percentage sand gross margins by about 30 basis points.

The Deutsche Bank team is estimating earnings of $2.27 per share for the quarter, while the Stifel team estimates earnings of $2.26 per share and $58.35 billion for the March quarter.

Concerns about Apple’s (AAPL) guidance

Analysts from several firms mentioned concerns about guidance for the June quarter. Apple Inc. (NASDAQ:AAPL) management did say they expect currency headwinds to be stronger in the June and September quarters because their hedges start rolling off. BMO analyst Keith Bachman is particularly concerned about gross margin guidance in light of the currency issues.

Huberty thinks Apple Inc. (NASDAQ:AAPL)’s revenue guidance for the June quarter will be a little under the consensus estimate just as it has been in seven of the last nine quarters.