Wells Fargo analyst Maynard Um has issued a new “valuation range” price target on Apple (NASDAQ:AAPL) shares following the company’s seven-for-one stock split. After closing at $645.57 on Friday, Apple shares opened at $92.69 on Monday, while every Apple shareholder of record acquired six additional shares for every share held.
“We are adjusting our valuation range to $86-$93 to reflect the 7-for-1 stock split (maintaining our 13-14x multiple on our split-adjusted FY2015 EPS estimate of $6.56),” wrote Um in a note issued Monday. “We believe Apple shares have benefited from strong investor sentiment driven by broader market trends and the prospect of positive news flow expected over the coming quarter, of which the share split, in our opinion, was one.”
Before the stock split, Um’s valuation range on Apple shares was $595 to $640, or $85 to $91.40 if the range prices are reduced to the stock’s current one-seventh value level. In this sense, Um’s valuation range only went up slightly from what it was before the split. It should be noted that although the stock split did not change Apple’s overall market value, it did vastly increase its number of outstanding shares from around 861 million to 6.03 billion, according to statistics provided by Yahoo Finance. Some analysts have observed that an increase in the number of shares and a lower entry price can often spark investors’ interest in a stock and drive up the value.
However, despite a slight increase in his valuation range price targets, Um maintained his “Market Perform” rating on Apple based on his unchanged overall investment thesis on the company. “[T]here is limited market cap opportunity in the markets Apple currently plays in, our expectation for gross margin pressures in the upcoming cycle, and beginning signs of a balance of power shift between operators and handset vendors,” wrote Um.