ResMed: Why Insider Sales Under 10b5-1 Plans Don't Dampen Long-Term Appeal

ResMed (NYSE: RMD) has faced scrutiny over recent insider sales, with executives like CEO Michael Farrell and CFO Brett Sandercock reducing their holdings under pre-arranged Rule 10b5-1 plans. Yet, amid strong Q1 earnings, robust institutional buying, and a dividend-backed growth story, the stock remains compelling for investors. Let's dissect whether these sales signal caution—or simply prudent wealth management.

The Case for Calm: Insider Sales as Pre-Planned Strategy

The recent insider activity—most notably the CEO's $9.4 million in sales between April and June—has drawn attention. However, these transactions are not red flags but reflections of standard executive financial planning.

• Rule 10b5-1 Plans Explained: These SEC-approved trading plans allow insiders to sell shares on a predetermined schedule, shielding them from accusations of trading on material non-public information. The filings explicitly state that no adverse undisclosed information exists, as seen in Global General Counsel Michael Rider's July 2025 Form 144 filing.
• Minimal Ownership Impact: Insiders collectively hold just 0.71% of outstanding shares, meaning sales are isolated actions rather than a coordinated exit. Even the CEO's substantial sale leaves him with 84,283 shares—a long-term stake signaling confidence.

The takeaway? These sales are about diversification, not doubt. As one analyst noted, “Executives in high-growth sectors often use these plans to systematically reduce holdings without market timing—a sign of stability, not concern.”

Strong Fundamentals: Earnings Growth and Analyst Optimism

While insiders manage their wealth, ResMed's fundamentals shine.

• Q1 2025 Results: Reported in October 2024, the quarter delivered 10% revenue growth to $1.3 billion, with net income surging 65% to $344.6 million. Non-GAAP EPS rose 29%, driven by margin expansion and strong SaaS adoption.
• Analyst Consensus: A “Moderate Buy” rating and a $286 price target from KeyBanc highlight confidence. Morgan Stanley's upgrade to “Overweight” cites ResMed's dominance in sleep therapy and its shift toward recurring software revenue (SaaS), a high-margin growth lever.

Institutional Buying: A Vote of Confidence

Despite insider sales, institutions are doubling down.

• Dividend Stability: A $0.53 quarterly dividend (yield ~0.8%) signals financial health, attracting income-focused investors. The payout has grown steadily since 2018, aligning with free cash flow generation.
• Smart Money Activity: As of June 2025, institutional ownership remained robust, with firms like Fidelity and BlackRock increasing stakes. This aligns with the company's long-term goals: 8-10% revenue growth and $1.5 billion in annual free cash flow by FY2026.

Risks and Upcoming Catalysts

No investment is without risks. ResMed faces macroeconomic headwinds and potential reimbursement pressures in healthcare markets. Investors should monitor its July 31 Q4 earnings report for key signals:

• Revenue growth must stay above 10% to meet targets.
• Gross margins near 60% must hold despite rising input costs.
• Management's guidance on FY2026 will test whether the company can sustain its SaaS-driven momentum.

Investment Thesis: Buy the Dip, Hold for Dividends and Growth

ResMed's stock trades at ~25x forward earnings—slightly above its five-year average but justified by its high margins and recurring revenue streams. For long-term investors, the combination of:

1. Defensible Market Position: 80%+ market share in CPAP devices.
2. Growth Catalysts: SaaS expansion and AI-driven diagnostic tools.
3. Institutional Backing: ~90% of shares held by institutions.

makes dips below $250 a buying opportunity.

Final Take

ResMed's insider sales are noise, not news. With strong fundamentals, smart institutional support, and a roadmap to $1.5 billion in free cash flow, the stock remains a top pick in the healthcare tech space. Investors should focus on the company's ability to execute its SaaS strategy and navigate macro challenges—while ignoring the noise of routine wealth management by executives.

Rating: Buy
Price Target: $285 (aligns with KeyBanc's target, +11% upside from $256.91 as of June 2025).