By Aaron Pressman
January 30, 2017

Apple reports the results of its all-important holiday quarter on Tuesday after the market closes, and Wall Street analysts are getting a bit antsy.

Apple told the analysts three months ago that it expected sales of $76 billion to $78 billion, up from $75.9 billion for the same quarter in 2015. Analysts on average now expect sales of $77.4 billion and earnings per share of $3.24, versus the $3.28 Apple reported a year earlier.

But many analysts are focused on what Apple says on Tuesday about the year ahead, with anticipation building for a far more exciting iPhone update in 2017 after three years of an almost identical exterior design. And some are worried that the excitement may have gotten ahead of the reality and could possibly depress sales of the iPhone 7 over the next nine months.

Apple’s share price has gained 16% over the past six months, outpacing the 5% gain in the S&P 500 Index, on the growing optimism over what the analysts have dubbed the iPhone 8 or iPhone X, as it will be the 10th anniversary edition. Apple, per its usual practice, has not given any clues about the unannounced product.

Among the worriers, Barclays analyst Mark Moskowitz last week downgraded Apple’s stock to equal weight from its previous overweight rating. Even with rumored fabulous new features, the next iPhone still won’t be able to overcome some of the issues that have hit smartphone sales recently, Moskowitz wrote.

“Maturation of the device-centric consumer electronics adoption wave could weigh on both Apple and the smartphone market,” Moskowitz told investors. “Smartphones in general have evolved technologically to become more than good enough to serve most users’ digital needs over multiple years or until the device breaks,” he added later in the report.

Bernstein Research analyst Toni Sacconaghi lowered his 2017 profit estimate for Apple (aapl) to $8.71 per share from $8.91 as well.

“Apple remains an iPhone centric story,” Sacconaghi wrote a report previewing the upcoming earnings. “And the principal risk near term is simply that the iPhone 7 cycle is weaker than anticipated, likely due to continued elongating replacement cycles (i.e., the device is not different enough from its recent predecessors to drive upgrades), or because of sluggish demand/share shifts in emerging markets, most notably China.”

UBS analyst Steve Milunovich cut his estimates for iPhone sales in 2017 before thew model is introduced. Apple is likely to sell only 94 million iPhones in the first six months of 2017, down from his earlier estimate of 99 million, Milunovich wrote. Still, that could aid demand once the next iPhone, dubbed by analysts as the iPhone 8 or iPhone X as it will be the 10th anniversary edition.

“Guidance could be a bit light for March, but the case can be made that the worse that March and June are, the better the upgrade cycle next fiscal year,” Milunovich wrote.

Likewise, Andy Hargreaves at Pacific Crest Securities thinks short-term disappointments will give way to longer-term benefits. Apple shares could sink a bit if the company simply reports quarterly results that match the average analyst forecast. If that happens, he recommends investors buy the stock.

“We believe the most likely scenario in the next iPhone cycle is for Apple to launch three new high-end SKUs: iPhone 7s, 7s Plus and X, with the iPhone X having an AMOLED screen and a premium price,” Hargreaves wrote. “Looking beyond F2017, we see the potential for meaningful upside to our estimates if Apple introduces a third high-end iPhone at a higher price, which could increase our current growth expectations and the multiple investors are willing to pay.”

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Among other optimists, Angelo Zino of CFRA Research is expecting Apple to beat expectations for the most recent quarter, in part because iPhone chip supplier Skyworks Solutions (swks) exceeded expectations when it reported fourth quarter results on January 19. Samsung’s Galaxy Note 7 recall also probably boosted Apple.

“Demand for the iPhone 7 as well as 7 Plus remained robust through the December quarter, aided by an aging iPhone installed base and added features that seem to have appealed to many consumers,” Zino wrote in a report on Jan. 25. “Given issues with AAPL’s most formidable opponent, we think the company benefited from a more favorable competitive landscape and likely witnessed higher Android switcher rates in the December quarter.”

Cowen & Co analyst Timothy Arcuri is less worried about the iPhone 7 and thinks the market will be looking ahead positively to the next iPhone, even though some of the new features to be added, like brighter OLED screens, may cost Apple more on the manufacturing side.

“Results should be fine or better and we think March guide will be fine (focus shifting to iPhone 10/X anyway),” Arcuri wrote. “Hardware margin pressure is clear (especially in launch this Fall w/~$50 incremental OLED cost) but services remain offset. Regardless, the ‘powder keg’ is about to be lit.”

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