Trade Alert: Independent Director Of Palo Alto Networks John Key Has Sold Stock

Some Palo Alto Networks, Inc. (NASDAQ:PANW) shareholders may be a little concerned to see that the Independent Director, John Key, recently sold a substantial US$1.0m worth of stock at a price of US$350 per share. That's a big disposal, and it decreased their holding size by 27%, which is notable but not too bad.

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The Last 12 Months Of Insider Transactions At Palo Alto Networks

Notably, that recent sale by John Key is the biggest insider sale of Palo Alto Networks shares that we've seen in the last year. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$351. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 27% of John Key's holding.

Palo Alto Networks insiders didn't buy any shares over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Palo Alto Networks insiders own 0.9% of the company, currently worth about US$1.0b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Palo Alto Networks Tell Us?

An insider sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. But it is good to see that Palo Alto Networks is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To that end, you should learn about the 3 warning signs we've spotted with Palo Alto Networks (including 1 which is a bit unpleasant).

Of course Palo Alto Networks may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.