Executives are selling their company stock at record amounts in 2021, including the Microsoft CEO, Satya Nadella. Microsoft has been on a tear this year, with the stock price up 50% year-to-date and currently sitting at $325 and an eye-watering market capitalization of $2.4 trillion.

Perfect timing?

In the last couple of months, Nadella has sold ~900,000 shares, cashing in around ~$300 million. This is a significant sale, as it represented roughly half of his Microsoft shares and the timing of the transactions has raised eyebrows, especially with Microsoft stock at record levels. Has the MSFT price peaked and is the CEO cashing out at the perfect time? A company statement indicated that Nadella’s sale was for “personal financial planning and diversification reasons.”

Fundamentals

The strength of Microsoft’s financials should help reassure some concerns of interpreting insider selling as a warning. Despite the mega-cap size of the company, revenues have continued to increase at ~20% for each of the last three quarters. MSFT has also continued to evolve despite their long history, with an increasing share of their revenue coming from “Server Products and Cloud Services” and decreasing reliance on “Office Products and Windows”.

Wall Street support

As shown in our recent Tech Stocks Analyst Recommendations piece, Microsoft still looks to be one of the best stocks to hold in your portfolio. A Bloomberg survey of equity research analysts indicates that 90% of analysts currently have a “BUY” rating on MSFT, whilst 10% have a “HOLD” rating, and no analysts have a “SELL” rating.

Overall, we believe Microsoft stock will continue to outperform the market, and this seems to be another case of a savvy CEO trying to take some profits ahead of expected US tax increases in 2022.

AlphaPicks does not own shares in Microsoft. To buy shares, register here with our preferred partner, EToro.

Leave a Reply