Apple (NASDAQ:) is set to report its earnings for the fiscal Q2 2024 on May 2, and Morgan Stanley analysts expect the iPhone maker will slightly top the consensus estimates.

However, they anticipate that the guidance for the June quarter's revenue and implied EPS will be 4-7% below Wall Street expectations, “a print we believe this market would punish,” analysts wrote.

Still, they note differences from three months prior: Apple's share price has decreased by 12%, the valuation has dropped by 2.5x turns, and buy-side sentiment and positioning are more negative.

Looking ahead, they anticipate that the next major post-earnings catalyst for AAPL will be Apple's Worldwide Developer Conference (WWDC), where Morgan Stanley expects the company to unveil new AI software developments.

“As a result, there's a chance Apple could see a relief rally/squeeze higher on a "better than feared" earnings report/guide,” analysts said in a note.

“This creates a tricky setup, and one we don't believe investors necessarily need to step in front of,” they added.

But, with a 12% downside to its bear case valuation and a 30% upside to the new price target of $210, as well as expectations of an AI-driven iPhone cycle in the fiscal year 2025, Morgan Stanley remains Overweight rating on AAPL.