Apple (AAPL) Sell-Off Seen as 'Overdone', Wells Fargo Upgrades Stock to Outperform

(Updated - August 25, 2015 7:17 AM EDT)

Wells Fargo analyst Maynard Um thinks the correction in Apple (NASDAQ: AAPL) has gone too far and he upgraded the stock from Market Perform to Outperform with a price target of $125-$135.

Yesterday Apple CEO Tim Cook sent an email to CNBC's Jim Cramer with an update on operations in China. In Um's view, this provides some comfort for investors.

The analyst explained, "While we note that our fundamental stance on Apple’s challenges are unchanged, we believe shares have over-corrected. Tim Cook’s email to CNBC’s Jim Cramer that iPhone activation growth in China “has actually accelerated over the past few weeks…” gives us better visibility to the Sept quarter (September is typically an iPhone transition month making Jul/Aug important, in our opinion)."

Um continued, "Given broader macro concerns, this is a visibility others in our group do not have, which we think will be important heading into earnings. We also note AAPL’s 3rd party manufacturing & component commitments (see our June 2015 PictureBook note) suggest upside potential to its $49B-51B guidance. While our concern on tough compares for the Dec quarter are unchanged and our ests remain below the Street, we believe the stock had been reflecting this challenge and see the incremental sell-off as now presenting a more attractive risk/reward."

The analyst added, "We believe the risk/reward at 8x our FCF is tilted favorably with China strength appearing to have continued recently and the quarter having some visibility, which we see as important heading into earnings."

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $103.12 yesterday.

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