Cloudflare (NET) Plunges 5.7% Amid Insider Selling and Analyst Divergence – What’s Next?

Summary
• Cloudflare (NET) tumbles 5.7% to $191.24, its worst intraday drop since 2023
• CFO and co-founder sell $124M in shares, signaling bearish sentiment
• Analysts split between 'Overweight' and 'Sell' ratings, with Piper Sandler cutting price target to $220
• Options chain surges: 2026-01-16 P180 put options see 292% price change and 122x leverage

Cloudflare’s sharp selloff reflects a perfect storm of insider caution, analyst fragmentation, and bearish options positioning. With the stock trading near its 200D MA of $185.59 and key support at $190.62, the move tests whether its AI-driven growth narrative can withstand near-term skepticism.
Insider Selling and Analyst Divergence Fuel Turbulence
Cloudflare’s 5.7% intraday plunge stems from a confluence of factors. CFO Thomas Seifert and co-founder Michelle Zatlyn sold 611,092 shares (~$124.6M) in Q4, while Piper Sandler slashed its price target to $220 (-8.6% from prior). This follows mixed analyst coverage—KeyCorp and Barclays remain bullish with $235–$275 targets, but Guggenheim and Piper Sandler now caution. The options market amplifies bearish sentiment: 2026-01-16 P180 puts (NET20260116P180) surged 292% with 122x leverage, reflecting aggressive short positioning. Meanwhile, the stock’s -557x PE ratio and 30.7% revenue growth (Q3) highlight valuation risks in a competitive AI infrastructure market.

Internet Services Sector Mixed as Akamai (AKAM) Trails
The Internet Services sector remains fragmented. Akamai (AKAM), Cloudflare’s closest peer, fell 1.6% on 2026-01-16, underperforming the broader tech rally. While Cloudflare’s AI infrastructure push faces execution risks, Akamai’s stable CDN business lacks the same growth narrative. This divergence underscores investor preference for high-growth but speculative plays over established players in a sector where 2026 EBITDA margins remain under pressure from price competition.

Bearish Options and ETFs Highlight Volatility Playbook
• 200D MA: $185.59 (below current price)
• RSI: 58.6 (neutral)
• Bollinger Bands: $189.83 (lower) to $211.08 (upper)
• MACD: -1.82 (bearish divergence)

Cloudflare’s technicals suggest a short-term bearish bias. The 200D MA at $185.59 acts as a critical support level, while RSI neutrality and MACD divergence hint at potential oversold conditions. For options, two contracts stand out:

• NET20260116P180 (Put):
- Strike: $180, Expiry: 2026-01-16
- IV: 45.24% (moderate), Leverage: 122.07%, Delta: -0.1997 (moderate bearishness), Theta: -0.0276 (slow decay), Gamma: 0.0207 (high sensitivity)
- Turnover: $60.9M (liquid)
- Payoff at 5% downside ($181.73): $1.73/share (1.8% of strike). This put offers high leverage and liquidity, ideal for capitalizing on a potential breakdown below $190.

• NET20260116P175 (Put):
- Strike: $175, Expiry: 2026-01-16
- IV: 51.49% (moderate), Leverage: 173.11%, Delta: -0.1361 (mild bearishness), Theta: -0.0622 (moderate decay), Gamma: 0.0142 (moderate sensitivity)
- Turnover: $1.84M (liquid)
- Payoff at 5% downside ($181.73): $6.73/share (3.9% of strike). This contract balances leverage and time decay, suitable for a mid-term bearish bet.

For ETFs, the Direxion Daily NFLX Bull 2X Shares (NFXL) (-1.1% intraday) could mirror tech sector volatility, though its focus on Netflix may dilute Cloudflare-specific exposure. Aggressive traders might pair NFXL with the P180 put for a leveraged short-tech play.

Backtest Cloudflare Stock Performance
The backtest of a strategy that involves a -6% intraday plunge from 2022 to the present shows poor performance. The strategy's return is 3.55%, trailing the benchmark by 29.89%. With a maximum drawdown of 0%, the strategy has experienced significant volatility but lacks downside protection.

Cloudflare at Crossroads: Defend $190 or Reprice AI Narrative
Cloudflare’s 5.7% drop tests its ability to sustain the AI infrastructure narrative amid insider caution and analyst fragmentation. The stock’s near-term fate hinges on defending $190.62 support and whether the 200D MA at $185.59 can hold as a floor. A breakdown below $180 would validate bearish options positioning, while a rebound above $201.90 could reignite growth optimism. Sector peers like Akamai (-1.6%) highlight the sector’s fragility, but Cloudflare’s AI-driven story remains its best catalyst. Watch for $190.62 support or a $220 price target retest by Piper Sandler.