Wells Fargo Upgrades AAPL, Says Market Overcorrected

Wells Fargo analyst Maynard Um upgraded Apple's stock rating to Outperform on Tuesday following Monday's rollercoaster market correction. He thinks Apple's stock dip yesterday was an overcorrection and that investors have a new buying window.

Wells Fargo upgrades AAPL to OutperformWells Fargo upgrades AAPL to Outperform

The stock market went on a downward spiral on Monday in reaction to China's economic issues. Tech stocks took a hard hit, and Apple dropped about 13 perecent in pre-market trading. The iPhone and iPad maker opened at US$95.17 and continued to make back some of its value throughout the day.

Apple CEO Tim Cook surprised everyone by sending an email to CNBC's Jim Cramer reassuring him that China's economic woes weren't having a negative impact on iPhone sales.

"I can tell you that we have continued to experience strong growth for our business in China through July and August," Mr. Cook said. "Growth in iPhone activations has actually accelerated over the past few weeks."

That email may have been the key to stopping Apple's stock decline, and likely played a role in reversing the overall market drop.

In a note to investors Mr. Um said,

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 September quarter (September is typically an iPhone transition month making Jul/Aug important, in our opinion). Given broader macro concerns, this is a visibility others in our group do not have, which we think will be important heading into earnings.

He added that Apple will likely come in at the high end of its $49 billion to $51 billion guidance for the quarter. That said, Mr. Um is concerned about declining iPad sales, and he doesn't think Apple is selling as many Apple Watches as Wall Street estimates.

Mr. Um "Outperform" rating comes with a target price range between $125 and $135. Apple is currently trading at $108.90, up 5.78 (5.61%).