Storm Clouds Gather as Investors Await Apple’s Earnings Report

There’s a pall hanging over Apple’s stock as investors await the company’s holiday quarter earnings report.

Analysts have been saying for months that Apple would have trouble matching — let alone surpassing — last holiday season’s record sales of the iPhone 6 and 6 Plus, which tapped into pent-up consumer demand for big-screen smartphones.

Tomorrow represents the moment of truth: Will smartphone sales top the high-water mark of 74.5 million?

Researchers, including Strategy Analytics, predict Apple’s first quarter worldwide shipments will fall short, which would represent the first year-over-year decline since the iPhone was introduced in 2007. Apple still remains heavily dependent on the performance of its smartphones, which account for about two thirds of its revenue.

The pessimism is reflected in Apple’s stock price, which closed at $99.44 Monday, down $2.01 in the day’s trading and well off its yearly high of $134.54.

“It has been a perfect storm for Apple investors over the past few months,” writes FBR analyst Daniel Ives. “As the combination of softer 6s demand, negative China headlines and back-end loaded Apple Watch growth trajectory has seemingly catalyzed many on the Street to throw in the white towel on this name until demand improves.”

Wall Street analysts polled by Thomson Reuters expect Apple to report per-share earnings of $3.23 on revenue of $76.6 billion for its fiscal first quarter. That would represent a modest improvement over the record results Apple turned in in its first quarter of 2015, when it reported a quarterly profit of $3.06 per share on revenue of $74.6 million — and in line with Apple’s revenue guidance of between $75.5 billion and $77.5 billion for the quarter.

The investor community will be closely watching Apple’s guidance for its March quarter for signs of the health of its iPhone business.

Bernstein technology analyst Toni Sacconaghi, pointing to signs of slowing demand among 10 major Apple suppliers, forecasts iPhone sales of 50 million in Apple’s second quarter, well off from the 61 million units it shipped a year earlier.

None of this should come as a surprise. Apple watchers are well acquainted with the Cupertino technology giant’s “tick-tock” cadence of introducing major smartphone upgrades every other year. Incremental upgrades, like the iPhone 6s and 6s Plus, don’t always produce the same sales bumps as more substantial product updates.

This article originally appeared on Recode.net.