TE Connectivity’s CFO Share Sale Masks AI-Driven Value: A Contrarian Opportunity at 13x P/E

TE Connectivity (TEL) has been in the spotlight this week after its CFO, Heath Mitts, sold $5.8 million worth of shares on May 9—a transaction that’s sparked questions about whether insiders are cashing out at the top. But dig deeper, and the data tells a different story: TEL’s record free cash flow, dividend resilience, and AI-driven revenue growth suggest this stock is primed for upside, even as executives trim holdings.

[text2img]A close-up of TE Connectivity’s high-performance electrical connectors used in AI data centers, glowing with circuit-board complexity[/text2img]

The CFO’s Sale: A Prearranged Plan, Not a Red Flag

The $5.8 million sale by Mitts—37,844 shares at an average price of $153.33—was executed under a prearranged trading plan, a common practice for insiders to avoid perceived market manipulation. Crucially, the CFO still retains 45,503 shares post-sale, signaling confidence in TEL’s long-term prospects. The transaction also followed the exercise of stock options granted years earlier, aligning with standard wealth management strategies for executives.

What’s more, the timing of the sale coincides with TEL’s strong Q1 2025 results, which include record free cash flow of $674 million—up 18% year-over-year—and a consistent dividend payout of $189 million. These metrics suggest Mitts’ sale is a disciplined move, not a vote of no confidence.

The AI Growth Engine: Fueling Cash Flow and Valuation

The real story here is TE Connectivity’s dominance in AI infrastructure. In its latest earnings, the Industrial segment—home to AI-driven applications—reported 17% year-over-year sales growth, with the Digital Data Networks sub-segment surging 76.6% due to demand for high-speed connectivity in data centers. This segment now accounts for 44% of total revenue, and CEO Terrence Curtin explicitly tied the growth to “ongoing momentum in AI, aerospace, and energy.”

The would show a clear acceleration in AI-related sales, underpinning TEL’s ability to command pricing power in critical tech sectors.

Why the Stock Is a Bargain at 13x Forward P/E

Despite the insider activity, TEL trades at a 13x forward P/E ratio, a discount to its five-year average of 18x and well below peers like Amphenol (22x) or Littelfuse (16x). This valuation gap ignores TEL’s fortress balance sheet—$2.3 billion in net cash—and its ability to generate $2.5 billion in annual free cash flow, up from $1.8 billion five years ago.

The would highlight this undervaluation, especially given the company’s exposure to secular trends like AI, EVs, and industrial automation.

The Contrarian Play: Ignore the Noise, Buy the Dip

Critics will argue that insider selling is a risk, but TEL’s financials and end-market tailwinds make this a classic case of short-term noise obscuring long-term value. The CFO’s sale is a drop in the bucket compared to TEL’s $35 billion market cap, and it doesn’t negate the fact that:
1. Free cash flow is at record levels, with management prioritizing shareholder returns (dividends + buybacks totaled $500 million in Q1).
2. AI revenue is accelerating, with the Industrial segment’s margins expanding to 17.9%—a sign of operational efficiency.
3. The valuation is compelling, with shares down 12% from their 52-week highs but still within striking distance of their 2023 lows.

Final Call: TEL at 13x P/E—A Buy for Growth at a Value Price

TE Connectivity isn’t just surviving in this tech-driven economy; it’s thriving. The CFO’s sale is a sideshow in a story of a company with a 120-year history of adapting to industrial revolutions. With AI spending expected to hit $1.3 trillion annually by 2030 (per IDC), TEL’s connectors and sensors are the plumbing of this new world.

For investors, the question isn’t whether insiders are selling—it’s whether you’re buying before the market catches up to TEL’s AI-powered renaissance. At 13x forward earnings, the answer is clear: now is the time.

This analysis is for informational purposes only and not financial advice. Always consult a professional before making investment decisions.