Apple is scheduled to release its next earnings report on Jan. 27, and unsurprisingly, analysts are expecting strong results and possibly an earnings beat. Those expectations are driven by data points which suggest strong demand for the iPhone 6 and iPhone 6 Plus.

However, Morgan Stanley analysts think Apple’s guidance for the current quarter could be a bit light, although they also expect strong demand for the Apple Watch when it arrives on the market in a couple of months.

Apple’s iPhone average selling price

In a pair of reports dated Jan. 20 and Jan. 21, analyst Katy Huberty and her team at Morgan Stanley provided updated data on their AlphaWise smartphone tracker and estimates for Apple’s next earnings report. The firm is the second to say that Apple is in the midst of a “super cycle” thanks to the iPhone 6 and iPhone 6 Plus.

In one report, the analysts point out that the average selling price of the iPhone should be strong because shoppers are opting for models with higher capacities. They collected data on purchase intentions which indicate rising plans to buyer models with 64 and 128 gigabytes of storage. (Graphs are courtesy Morgan Stanley.)

Apple iPhone 6 sales

iPhone 6 spurs churn at U.S. carriers

The Morgan Stanley team also said about 75% of iPhone users upgrade every two years, compared to about 50% for other smartphone users. They conducted a survey in November and December to gauge purchase intention timing by brand:

Apple iPhone 6 sales

They say it appears as if the iPhone 6 and iPhone 6 Plus are indeed triggering a strong upgrade cycle for Apple. As a result, they see risks to mobile carriers’ churn rates. Of the major U.S. carriers they think Verizon and T-Mobile are the best-positioned.

Apple iPhone 6 sales

iPhone, Mac to drive Apple earnings

The analysts pulled together all the data to compile their estimates for Apple’s (NASDAQ:AAPL) December earnings report. They expect the company’s results to be about in line with expectations but believe guidance for the March quarter could be a bit weak. They say the next catalysts for Apple (NASDAQ:AAPL) shares are the launch of the Apple Watch and upside to the company’s margins.

Of course the iPhone always plays a prominent role in Apple’s (NASDAQ:AAPL) earnings report, but the Morgan Stanley team thinks the Mac helped boost the December quarter results as well. They believe the company sold between 67 million and 69 million iPhones, which is actually higher than their previous estimate of 62 million. They based the higher range on the data from their AlphaWise smartphone tracker, which suggests 67 million, and their colleague’s supply build estimate of 69 million. They’re projecting an average selling price of $667.

Apple iPhone 6 sales

For Macs, they project 5.8 million shipments based on IDC’s estimate. That’s higher than their previous estimate of 5.2 million shipments. Their iPad projection is 22 million based on supply chain builds.

What to expect in Apple’s earnings report

They believe Apple will beat guidance for the quarter, just as Wall Street expects. Management guided for revenue of between $63.5 billion and $66.5 billion and a gross margin of between 37.5% and 38.5%. The Morgan Stanley team projects $65.3 billion in revenue, a gross margin of 38.5% and earnings per share of $2.50.

If their higher iPhone and Mac estimates prove to be correct, however, they say Apple’s (NASDAQ:AAPL) numbers could go as high as almost $69 billion for revenue, 38.7% for gross margin and almost $2.70 per share in earnings.

For the March quarter, consensus estimates suggest revenue of $53.6 billion, but Huberty and her team note that Apple’s guidance has been lower than consensus estimates in six of the last eight quarters. Based on the average of 6% below consensus, it suggests the midpoint of management’s guidance will be around $50 billion.