By Aaron Pressman
November 2, 2017

Apple CEO Tim Cook reports the company’s financial results for the third quarter, its fiscal fourth quarter of 2017, after the market closes on Thursday. Apple’s stock price has been making all-time highs regularly in recent weeks, as analysts expect the iPhone maker brought in $50.7 billion in sales generating earnings per share of $1.87.

At a price of almost $167 per share, Apple (aapl) needs only appreciate another 15% or so to reach an unprecedented stock market valuation of $1 trillion. But while the past quarter included some early sales of the new iPhone 8 and 8 Plus models, it did not include the higher-priced iPhone X, which doesn’t arrive until Friday. So what will investors be focused on in today’s report?

Apple’s iPhone X expectations

Apple hasn’t said much in detail about sales of the all-important iPhone X, which starts at $999. After pre-orders began on October 27, the company said only that “from the initial response, customer demand is off the charts.”

But analysts say Apple will also be signaling how well the phone is selling when it reveals its revenue forecast for the upcoming holiday shopping quarter (its fiscal first quarter of 2018).

“September quarter results provide little clarity on the upcoming iPhone upgrade cycle as they only reflect <10 days of iPhone 8 and 8 Plus shipments,” Morgan Stanley analyst Katy Huberty wrote last week. “Most importantly, we look to the December quarter guide and commentary on iPhone X pre-orders as the most important drivers of investor sentiment going forward.”

Last year, Apple reported record holiday season sales of $78.4 billion, though that was up only 3% from the year before. Analysts expect on average an almost 10% jump to $86 billion this year. There are rumors that Apple is having trouble making enough of the iPhone X model to meet demand, although the pre-order backlog has remained relatively steady at five to six weeks. Apple’s sales forecast, then, will be scrutinized and questioned by the analysts as they try to suss out more about supply and demand of the most expensive iPhone yet.

The forecast will also help investors understand whether Cook made the right move in raising prices for this year’s batch of new phones. The entry-level iPhone 8 was $699, up $50 from last year’s starter iPhone 7, and, of course the new iPhone X model is almost $1,000. Longtime Apple analyst Toni Sacconaghi said the price has been a limiting factor on iPhone X orders, calling it a “major constraint,” particularly in China.

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Apple’s gross profits

With many rumors of production delays and difficulties making the new iPhone X, Apple may have had to spend more than expected to keep the manufacturing lines running. Last year, Apple reported a gross profit margin for the third quarter of 38%, down from almost 40% the year before. And in the fourth quarter last year, it reported 38.5% down from 40%. Analysts have been expecting that Apple will be able to hold the line at 38% for those two quarters this year.

That could be challenging. The iPhone X contains Apple’s first phone with an OLED screen, complicating the sourcing and manufacturing of the display feature. The phone’s advanced, infrared facial recognition system, called Face ID, has also been problematic to install, according to some reports. And Apple also unveiled a slew of other new products recently, including the Apple Watch Series 3 and Apple TV 4K. Manufacturing costs are tyically higher when a new product is first introduced, then easing over time.

China, China, China

The world’s largest country was a huge engine of growth for Apple back in 2014 to 2015. But then starting last year, Apple’s China sales went into free fall. Last quarter, they dropped 10% from the prior year to $8 billion, the only region where Apple saw a decline.

There have been some early glimmers of hope. Apple’s iPhone sales in China for the third quarter hit 11 million units, up from 8 million the prior year, according to market tracker Canalys. It was the first time in six quarters that Canalys registered higher year-over-year iPhone sales in the region.

The iPhone X, despite the price, could help out, according to a recent report from analyst Brian White at Drexel Hamilton. “During our recent China Tech Tour, we uncovered positive vibes around the iPhone X,” White wrote. “Apple’s sales cycle in Greater China could turn positive on a quarterly basis in the first half of fiscal year 2018.”

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