NTAP

Conflicting Insider Signals at NetApp ($NTAP) After Stock Plunge: Director Buys $500K While CEO Continues Selling

03/31/2025 20:20

Data storage company NetApp ($NTAP) is showing notable insider trading patterns following a recent stock price plunge. After the company's earnings announcement on February 27, which triggered a 25% drop in share price over two weeks, a board member has stepped in with a significant purchase, drawing market attention. NetApp reported its fiscal Q3 2025 results on February 27, with revenue falling short of market expectations. The company recorded $1.64 billion in revenue, missing the anticipated $1.69 billion, which sent shares tumbling by approximately 18% on February 28 alone. The downward trend continued into early March, with the stock reaching lows of around $88. In this context, Director Anders Gustafsson's buying decision stands out. According to SEC filings, Gustafsson purchased a total of 5,524 shares across March 27-28, investing approximately $500,000. His average purchase prices were $91.00 on March 27 and $89.86 on March 28. This represents the only buying activity among insiders in the past nine months of trading data, suggesting the board member sees value at current price levels. Meanwhile, other key executives at NetApp have maintained consistent selling patterns over the past nine months. CEO George Kurian has sold 8,500 shares each month from June 2024 through March 2025, with total proceeds reaching approximately $9.7 million. This appears to be part of a predetermined 10b5-1 trading plan. Another notable pattern is the increased selling volume by EVP Michael Berry. Berry sold 7,500 shares monthly from June through December 2024, but since January 2025, he has increased his selling volume by 66% to 12,500 shares monthly. Notably, Berry is also the CFO who announced his retirement plans in August 2024. While his increased selling may reflect personal asset reallocation, it could partially reflect his view on the company's short-term outlook. President Cesar Cernuda has also conducted large quarterly sales. He sold approximately 22,000 shares each in June, September, and December 2024, and March 2025, with total proceeds of around $9.8 million. His most recent sale on March 28 came after the stock plunge, selling 19,696 shares at $90.22 per share for approximately $1.8 million. With a market capitalization of around $25 billion, NetApp is a key player in the data management and storage solutions market, providing cloud infrastructure and data management services. Recent performance shows its Hybrid Cloud segment generated $1.47 billion in revenue, while the Public Cloud segment brought in $174 million. The company recorded GAAP operating margins of 22% and non-GAAP margins of 30% for the third quarter. NetApp's insider trading patterns align with the challenges facing the company. In its recent earnings announcement, fiscal Q3 2025 revenue grew by just 2% year-over-year, fueling concerns about growth deceleration. While the all-flash array annualized net revenue run rate increased by 10% to $3.8 billion, overall revenue growth remained limited. From an industry perspective, NetApp faces intensifying competition from rivals like Pure Storage ($PSTG), despite positive trends in demand for cloud computing and AI infrastructure. Last July, UBS assigned its first 'sell' rating to Pure Storage, citing competitive challenges that could also apply to NetApp. Looking ahead, short-term catalysts for NetApp include expanded AI and cloud investment plans and the appointment of a new CFO. Current CFO Mike Berry will remain until May 2025, making the selection of his successor a potential stock mover. In the short term, Director Gustafsson's purchase suggests potential undervaluation at current price levels, but continued selling by other key executives warrants caution. Current investor sentiment toward NetApp is somewhat negative due to slowing performance and heightened competition concerns, though its P/E ratio of 16.4x represents relative undervaluation compared to the industry. From a long-term perspective, NetApp's strong hybrid cloud positioning and cash-generating capacity remain positive factors. The company held $2.26 billion in cash and investments at the end of Q3 and generated $385 million in operating cash flow during the quarter. It also returned $306 million to shareholders through share repurchases and dividends. In conclusion, NetApp's insider trading patterns reflect executives' mixed views on the challenges and opportunities facing the company. The board member's purchase after the steep price decline provides a positive signal, but continued executive selling suggests short-term caution. Investors should monitor upcoming quarterly results and the new CFO selection process.

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