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Apple Stock Gets a Big Target Price Boost. Supply-Chain Problems Are Improving.

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Apple has faced tough supply-chain challenges. Things could be looking up.
Chris McGrath/Getty Images

Tech stocks were getting hammered again Friday, but there was good news on the radar for Apple .

Wells Fargo raised its price target for Apple (ticker: AAPL) stock to $205 a share from $165 — implying some 25% upside from Thursday’s closing levels.

That makes analyst Aaron Rakers and his team at the bank among the more bullish on Wall Street; the average price target for Apple among analysts surveyed by FactSet is $179.

The world’s most valuable public company and a key player in Big Tech is set to report earnings next week. Heading into Apple’s results, Wells Fargo raised its estimates for quarterly revenue and profits in tandem with lifting the stock price target.

“We expect a focus on any commentary supportive of a belief that the supply chain is improving, continued confidence in strong end-user demand across the portfolio, as well as services/subscriptions momentum,” said the team of analysts at Wells Fargo.

Their confidence in the supply chain is shared by others. 

“Supply constraints are poised to ease in the first half of the calendar year while Apple also benefits from ongoing share gains at the high end of the China market,” said Angelo Zino, an analyst at CFRA Research. He added that “supply constraints likely limited upside to Dec.-quarter iPad sales, as Apple prioritized iPhone units.”

Apple’s profits — and its stock price — are heavily reliant on sales of the iPhone. While demand has been sky-high for the device, Apple, like many other manufacturers, has been pinched by supply-chain constraints.

While supply-chain improvements would be, without a doubt, materially positive, Rakers and his team view the upside in Apple stock as lying somewhere else.

“We believe the investment case for Apple has more to do with the company’s monetization of the installed base through an expanded portfolio of products and services (e.g., augmented reality /virtual reality, auto), rather than the near-term setup,” the Wells Fargo group said.

Shares in Apple were 0.7% lower in premarket trading Friday, in line with a broader decline in the market. The stock has fallen almost 10% this year, compared to a 6.5% fall for the S&P 500 index and a near 11% decline into correction territory for the tech stock-heavy Nasdaq Composite.

Write to Jack Denton at jack.denton@dowjones.com

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