3 Tech Stocks With Recent Intensive Insider Selling

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Includes: ATML, SFLY, YELP
by: Markus Aarnio

The technology sector has been the worst performing group over the recent six month period with a loss of 0.9%.

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For this article, I screened for technology stocks which have seen recent intensive insider selling. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

In this article, I will feature three technology sector stocks that met these three criteria of intensive insider selling in the last 30 days.

1. Shutterfly (NASDAQ:SFLY) provides an Internet-based social expression and personal publishing service that enables consumers to share, print, and preserve their digital photos through the medium of photography in the United States.

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Insider selling by insider (last 30 days)

  • Jeffrey Housenbold sold 212,500 shares on February 6-15 pursuant to a Rule 10b5-1 trading plan. Jeffrey Housenbold currently holds 639,264 shares or 1.8% of the company. Jeffrey Housenbold is President and Chief Executive Officer.
  • Brian Manca sold 12,745 shares on January 22 - February 20 pursuant to a Rule 10b5-1 trading plan. Brian Manca currently holds 32,739 shares or less than 0.1% of the company. Brian Manca is Vice President, Chief Accounting Officer.
  • Eric Keller sold 20,000 shares on February 13 and currently holds 17,976 shares or less than 0.1% of the company. Eric Keller serves as a director of the company.
  • James White sold 93,644 shares on February 8 and currently controls 101,180 shares or 0.3% of the company. James White serves as a director of the company.
  • Peter Navin sold 14,804 shares on February 6 pursuant to a Rule 10b5-1 trading plan. Peter Navin currently holds 10,777 shares or less than 0.1% of the company. Peter Navin is Senior Vice President, Human Resources.
  • Stephen Killeen sold 45,000 shares on February 7 pursuant to a Rule 10b5-1 trading plan. Stephen Killeen currently holds 15,437 shares or less than 0.1% of the company. Stephen Killeen serves as a director of the company.

Insider selling by calendar month

Here is a table of Shutterfly's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
February 2013 397,015 0
January 2013 7,844 0
December 2012 0 0
November 2012 6,500 0
October 2012 2,500 0
September 2012 0 0
August 2012 0 0
July 2012 26,380 0
June 2012 0 0
May 2012 3,684 50,000
April 2012 2,500 0
March 2012 9,487 0
February 2012 0 0
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There have already been more shares sold during February 2012 than during the past 12 months combined.

Financials

The company reported the full year 2012 financial results on February 5 with the following highlights:

Revenue $640.6 million
Net income $23.0 million
Cash $245.1 million
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Outlook

First Quarter 2013:

  • Net revenues to range from $107.2 million to $110.0 million, a year-over-year increase of 17.4% to 20.5%.
  • GAAP net loss per diluted share to range from ($0.39) to ($0.42).

Full Year 2013:

  • Net revenues to range from $739.7 million to $746.0 million, a year-over-year increase of 15.5% to 16.5%.
  • GAAP net income per diluted share to range from $0.38 to $0.51.

Competition

Here is a table comparing Shutterfly to the industry average.

Company SFLY Industry Average (Internet Information Providers)
Market Cap: 1.48B 328.66M
Employees: 1,107 448.00
Qtrly Rev Growth (yoy): 0.33 0.51
Revenue: 640.62M 142.14M
Gross Margin: 0.54 0.57
EBITDA: 82.47M 15.60M
Operating Margin: 0.06 0.09
Net Income: 23.00M N/A
EPS: 0.61 0.19
P/E: 66.87 31.75
PEG (5 yr expected): 4.81 1.80
P/S: 2.31 2.90
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Shutterfly is trading above the industry average P/E ratio, which could explain some of the insider selling.

My analysis

There have been nine insider sell transactions and there have not been any insider buy transactions during the last 30 days. The stock is trading at a P/E ratio of 66.87 and a forward P/E ratio of 50.36. The company has a book value of $19.01 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are high P/E ratio and the intensive insider selling activity.

2. Yelp, Inc. (NYSE:YELP) operates Yelp.com, an online urban city guide that helps people find places to eat, shop, drink, relax, and play based on the informed opinions of a community of locals in the know.

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Insider selling by insider (last 30 days)

  • Deer VI & Co. sold 167,200 shares on February 12-15 and currently controls 8,512,254 shares or 13.4% of Yelp.
  • Fred Anderson sold 350,977 shares on February 12 by Elevation Partners. Elevation Partners currently controls 8,623,254 shares or 13.6% of Yelp. Fred Anderson has served on the board of directors since February 2011.
  • Joseph Nachman sold 9,380 shares on February 11 pursuant to a Rule 10b5-1 trading plan. Joseph Nachman currently holds 87,495 options or 0.1% of the company. Joseph Nachman is Senior Vice President of Revenue.
  • Geoffrey Donaker sold 35,000 shares on February 11 pursuant to a Rule 10b5-1 trading plan. Geoffrey Donaker currently holds 113,268 options or 0.2% of the company. Geoffrey Donaker joined Yelp in 2005 to head business development and has been COO since 2006.
  • Laurence Wilson sold 4,375 shares on February 1 pursuant to a Rule 10b5-1 trading plan. Laurence Wilson currently holds 30,627 shares or less than 0.1% of the company. Laurence Wilson joined Yelp in 2007 as General Counsel.

Insider selling by calendar month

Here is a table of Yelp's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
February 2013 566,932 0
January 2013 53,130 0
December 2012 326,527 0
November 2012 611,921 0
October 2012 45,365 0
September 2012 626,790 0
August 2012 0 0
July 2012 0 0
June 2012 0 4,000
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There have been 2,230,665 shares sold and there have been 4,000 shares purchased since June 2012.

Financials

The company reported the full year 2012 financial results on February 6 with the following highlights:

Revenue $137.6 million
Net loss $19.1 million
Cash $95.1 million
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Outlook

As of February 6, Yelp provided guidance for the first quarter and full year of 2013.

  • For the first quarter of 2013, net revenue is expected to be in the range of $44.0 million - $44.5 million representing growth of approximately 62% compared to the first quarter of 2012. Adjusted EBITDA is expected to be in the range of $1.25 million -$1.50 million.
  • For the full year of 2013, net revenue is expected to be in the range of $210 million - $212 million, representing growth of approximately 53% compared to the full year of 2012. Adjusted EBITDA is expected to be in the range of $20 million to $22 million.

Competition

Yelp's competitors include Yahoo! (NASDAQ:YHOO). Here is a table comparing these two companies.

Company YELP YHOO Industry Average (Internet Information Providers)
Market Cap: 1.38B 24.44B 328.66M
Employees: N/A N/A 448.00
Qtrly Rev Growth (yoy): 0.65 0.02 0.51
Revenue: 137.57M 4.99B 142.14M
Gross Margin: 0.93 0.68 0.57
EBITDA: -10.28M 1.46B 15.60M
Operating Margin: -0.13 0.16 0.09
Net Income: -19.14M 3.95B N/A
EPS: -0.35 3.28 0.19
P/E: N/A 6.38 31.75
PEG (5 yr expected): -29.68 1.49 1.80
P/S: 10.03 4.90 2.90
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Yelp is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been six insider sell transactions and there have not been any insider buy transactions during the last 30 days. The stock is trading at a forward P/E ratio of 109.45. The company has a book value of $2.61 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are negative earnings and the intensive insider selling activity.

3. Atmel Corporation (NASDAQ:ATML) designs, develops, manufactures, and sells semiconductor integrated circuit [IC] products.

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Insider selling by insider (last 30 days)

  • Scott Wornow sold 20,000 shares on February 19 and currently holds 483,580 shares or 0.1% of the company. Scott Wornow joined Atmel as Senior Vice President, Chief Legal Officer & Chief Compliance Officer in November 2010.
  • Jamie Samath sold 22,373 shares on February 15-20 and currently holds 147,887 shares or less than 0.1% of the company. Jamie Samath is Vice President & Corporate Controller.
  • Stephen Cumming sold 99,259 shares on February 15-20 and currently holds 829,717 shares or 0.2% of the company. Stephen Cumming is Vice President of Finance and Chief Financial Officer.

Insider selling by calendar month

Here is a table of Atmel's insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
February 2013 141,632 0
January 2013 0 0
December 2012 0 0
November 2012 0 0
October 2012 0 0
September 2012 14,443 0
August 2012 0 10,000
July 2012 0 0
June 2012 0 0
May 2012 0 0
April 2012 0 0
March 2012 32,955 0
February 2012 129,589 0
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There have already been more shares sold in February 2012 than in the past 11 months combined.

Financials

The company reported the full year 2012 financial results on February 6 with the following highlights:

Revenue $1.4 billion
Net income $30.4 million
Cash $296.1 million
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Competition

Atmel's competitors include Intel (NASDAQ:INTC) and Texas Instruments (NYSE:TXN). Here is a table comparing these companies.

Company ATML INTC TXN Industry Average (Semiconductor - Broad Line)
Market Cap: 2.82B 100.01B 35.98B 3.82B
Employees: N/A 105,000 N/A 1.75K
Qtrly Rev Growth (yoy): -0.10 -0.03 -0.13 0.25
Revenue: 1.43B 53.34B 12.82B 677.97M
Gross Margin: 0.42 0.62 0.50 0.35
EBITDA: 155.05M 21.99B 4.01B 231.60M
Operating Margin: 0.05 0.27 0.21 0.01
Net Income: 30.44M 11.00B 1.73B N/A
EPS: 0.07 2.13 1.51 -0.20
P/E: 93.71 9.45 21.50 34.77
PEG (5 yr expected): -1.84 0.87 2.14 2.36
P/S: 2.09 1.93 2.86 1.82
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Atmel is trading above the industry average P/E ratio, which could explain some of the insider selling.

My analysis

There have been three insider sell transactions and there have not been any insider buy transactions during the last 30 days. The stock is trading at a P/E ratio of 93.71 and a forward P/E ratio of 13.96. The company has a book value of $2.31 per share. I believe there is an opportunity for a short entry. I would place a stop loss at $10, which is the 12 month high and a profit target at $4, which is the 12 month low. The two main reasons for the proposed short entry are high P/E ratio and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in ATML over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.