Eyebrows were recently raised on news that Apple (NASDAQ:AAPL) CEO Tim Cook sold 511,000 shares of APPL stock worth $87.8 million before taxes. However, investors should ignore the insider selling and double down on Apple’s shares for continued long-term gains.
According to filings with securities regulators, Cook earned $41.5 million from the stock sale after taxes were deducted. It was the CEO’s biggest stock sale in two years. Cook had previously made $355 million from a stock sale in August 2021. The Apple leader now owns 3.3 million shares of the company he runs, which is valued at more than $550 million based on the current stock price.
Curious Timing
It wasn’t just the size of Tim Cook’s stock sale that attracted investor attention. It was also the timing. The sale came at the end of a volatile month for the consumer electronics company. In mid-September, Apple launched its new iPhone 15. Early indications are that sales of the new smartphone have been brisk. However, there have also been reports the device is prone to overheating, requiring Apple to issue a fix.
Earlier in September, Apple was embroiled in geopolitics when reports surfaced that China had banned government workers from using its iPhones. With concerns rising that China planned to extend the ban to all citizens in the nation of 1.4 billion people, AAPL stock plunged, erasing $200 billion off its market capitalization in only a few days. However, China has since backed off on the ban.
The stock sale also comes amid some worrying long-term trends for Apple. The company’s most recent financial results showed a continuing decline in sales of its iPhone, Mac computer, and iPad, each of which has fallen for multiple quarters. Apple managed to beat Wall Street estimates for its second-quarter results due largely to strong sales of its services, such as its App Store and Apple TV, which grew 8% annually.
Continued Strength
Despite these issues, investors shouldn’t read too much into Tim Cook’s recent stock sale. While the stock sale by executives is often viewed as a sign of internal trouble at a company and a strong sell signal, that is unlikely to be the case at Apple. First, the stock sale was likely prearranged when Cook received the shares as part of his compensation. This is often the case at large, publicly traded companies and is done to avoid perceptions of insider wheeling and dealing on the part of management.
Second, while Apple has faced some near-term headwinds, most problems, such as overheating China and the iPhone 15, are being remedied. Also, most analysts on Wall Street continue to be bullish on the tech company and its stock. Among the 37 analysts who cover the company, the median price target on AAPL stock is currently $200, implying an 11% increase from current levels. JPMorgan Chase maintains a “buy” equivalent rating on the stock and a price target of $230.
Lastly, while Apple has seen a slowdown in sales of its electronic devices, its services are more than making up for the shortfall as the company’s ecosystem continues to grow and strengthen. The new iPhone 15, which includes a more durable Titanium shell, looks to be a hit with consumers. The company has a coming catalyst in early 2024 with the launch of its Vision Pro augmented reality headset, Apple’s first completely new product in a decade.
AAPL Stock: What’s Next
Despite the recent slump in its share price, Apple remains the world’s most valuable publicly traded company. Apple is, after all, the only company to have achieved a $3 trillion market capitalization, which happened less than six months ago. While the ride has been bumpy lately, AAPL stock can be expected to rise again and remain a leading blue-chip technology security. For these reasons, investors shouldn’t sweat Tim Cook’s recent stock sale.
On the date of publication, Joel Baglole held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
