'US strength likely to offset China weakness': Here's what 3 analysts expect from Apple's 3rd-quarter earnings report

• Apple is scheduled to reports its third-quarter earnings on Tuesday after the market close.
• Analysts expect the iPhone maker to record $73 billion in revenue and $1.00 in earnings per share.
• The earnings reports comes as Apple trades near record highs with a $2.5 trillion valuation.
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Apple's third quarter earnings report after the market close on Tuesday will help investors determine if Apple's current price-to-earnings multiple of about 30 times is justified or not.

All eyes will be on Apple's iPhone 12 sales, which are seasonally weak in anticipation of the company's upcoming iPhone 13 launch in September. Apple's Services business will also be closely watched by investors, as many have pinned Apple's historically high earnings multiple on the fast growth coming from software subscriptions, which includes Apple TV+, iCloud, and Apple Music.

Consensus estimates in the third quarter is for Apple to record $73 billion in revenue and $1.00 in earnings per share, according to 28 analyst estimates via Yahoo Finance.

Here's what three Wall Street analysts expect from Apple's third-quarter earnings report.

JPMorgan: Price Target $175, Overweight rating

JPMorgan, which sees 18% upside potential in shares of Apple, expects a strong print for Apple's third quarter earnings report, in part driven by ongoing momentum from the iPhone 12 lineup and the Services business.

"The better than expected results will likely drive higher confidence from investors in the sustainability of the beat, given that it is demonstrative of: 1) upside from upgrades to 5G phones, which are more likely to be a driver with the upcoming iPhone launch in September as well; and 2) the benefit of a larger installed base to sustainable iPhone replacement volumes as well as better Services growth," JPMorgan said.

The bank said investor expectations surrounding the upcoming iPhone 13 launch are too low, and Apple should continue to surprise to the upside.

Bank of America: Price Target $160, Neutral rating

Bank of America, which sees 8% upside potential in shares, expects a strong third quarter earnings report from Apple driven more by iPhone 12 sales than by strength in its services business.

"We expect Apple to report a strong F3Q21 on broad based hardware strength but expect services growth to moderate. Hardware sales remain strong for iPhones, iPads and Macs, and the company continues to benefit from increased spending on electronics given the remote work/home environment," BofA explained.

But BofA sees potential downside in Apple if the Delta variant of COVID-19 continues to spread and leads to another lockdowns.

"We are concerned that Apple will see the dual headwinds of tougher comps and weaker demand in Hardware only modestly offset by any Services re-acceleration," BofA said.

Goldman Sachs: Price Target $130, Neutral rating

Goldman Sachs, which sees 12% downside potential in shares, thinks Apple will post a strong third quarter earnings report and guidance that will have been driven by "a short-lived pulse in iPhone demand in the US similar to what we saw in China earlier this year," the bank said.

Goldman expects weak handset demand from China to be offset by continued strength in the US, in part driven by strong iPhone build orders and substantial iPad revenue backlog.

"Data for handset shipments in China for the months of April, May and June were weak, with total CQ2'21 handset shipments down 27% year-over-year," Goldman said.

"In China, it is now clear that this redesign cycle is materially weaker than the last one," according to Goldman. But strong consumer spending in the US should help Apple post a strong, yet unsustainable, third quarter earnings report.