As earnings season has kicked off for the spring quarter analysts are clamoring to pick the correct bulls and bears out of the bunch. Two key analysts are making a cautious note on one of the most popular stocks out there that is reporting early next week. Apple Inc. (NASDAQ: AAPL) is that stock, and although Merrill Lynch and Oppenheimer are not going completely bearish on it, they are still thinking that these earnings could be relatively soft.

Considering the whirlwind of negative news around high-end smartphones from TSMC, Qualcomm, Largan and more, expectations are muted for the June quarter. Merrill Lynch is continuing to model 50 million iPhones for March and 44 million for June.

The brokerage firm is adjusting its mix to reflect the demand for the SE version that has a lower average selling price (ASP) and gross margin. Merrill Lynch expects Apple to increase its share repurchase authorization during fiscal second-quarter earnings. As a result, the firm reiterated its Buy rating (but lowered its price target to $125 from $130) on the potential of a strong iPhone 7 cycle, and optionality afforded by a large cash balance to enter new addressable markets. Merrill Lynch also moved its fiscal 2016 estimates to $8.85 in earnings per share (EPS) on $229 billion in revenue.

Merrill Lynch detailed in its report:

We model 50 million iPhone units for the Mar quarter and 44 million for the June quarter, and our unit estimates are marginally lower than the Street. … Our estimates are baking in an assumption of about 20% year-over-year decline in the base iPhone business in both the March and June quarters. Given the iPhone SE is supply constrained, we expect limited ability to drive upside in the June quarter. Lower volumes and mix is likely to create modest gross margin pressure in the June quarter somewhat offset by FX tailwinds. We expect gross margin guidance in the range of 38%-39%.

The 16 gigabyte (GB) iPhone SE is priced at $399 in the United States, which is creating worries of significant margin compression. However, as Merrill Lynch looks at international pricing across various countries, and it saw that the price is higher than $500 in most regions. The firm estimates that a $470 blended ASP, which could be conservative, leads to about 36% gross margin for the iPhone SE.

Oppenheimer’s analyst Andrew Uerkwitz detailed in his report:

Apple will report March quarter earnings Tuesday, 4/26. Sentiment is very different this year. Remember last year, Apple was about to set record March quarter iPhone sales and the Apple Watch was just available for pre-order. The stock was close to its all-time-high (around $130). This year, the good news is that we believe an in-line quarter could help sustain recent momentum (up 14% since 1/27). However, we worry about the near-term negative impacts of a lengthening replacement cycle, Apple Watch sentiment seemingly turning negative, and competitive threats emerging as interfacing slowly evolves towards voice and AI messaging. Management commentary should be the big focus this quarter; it could go a long way toward easing investor fears.

The Outperform rating on Apple from Oppenheimer reflects a solid outlook for the flagship iPhone products. While overall smartphone market growth has slowed in recent years, the brokerage firm sees good opportunities for Apple to gain market share in both developed and emerging markets due to its significantly superior user experience, human-computer interface and premium branding. Oppenheimer also believes Apple’s ecosystem is stronger than ever and provides increasing appeal to mobile device consumers. Apple’s substantial capital return program should offset the potential downside from slowing iPhone sales growth in coming years.

Shares of Apple were trading at $106.12 Friday morning, with a consensus analyst price target of $133.64 and a 52-week trading range of $92.00 to $134.54.

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