3 Tech Stocks With Recent Intensive Insider Selling

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 |  Includes: AWAY, BLOX, PFPT
by: Markus Aarnio

The technology sector has been the worst-performing group over the recent six-month period with a gain of just 3.7%.

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For this article, I screened for technology stocks that 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. HomeAway (NASDAQ:AWAY) operates an online marketplace for the vacation rental industry worldwide.

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Insider selling by insider (last 30 days)

  • Ross Buhrdorf sold 1,071 shares on March 4, and currently holds 17,784 shares or less than 0.1% of the company. Ross Buhrdorf has served as the company's Chief Technology Officer since July 2005.
  • Jeffrey Brody sold 40,000 shares on February 21 - March 5, and currently controls 4,401,981 shares or 5.3% of the company. Jeffrey Brody serves as a director of the company.
  • Philip Siegel sold 177,514 shares on February 21 - March 5, and currently holds 107,300 shares or 0.1% of the company. Philip Siegel serves as a director of the company.
  • Brent Bellm sold 2,083 shares on February 21, pursuant to a Rule 10b5-1 Trading Plan. Brent Bellm currently holds 32,944 shares or less than 0.1% of the company. Brent Bellm has served as Chief Operating Officer since June 2010.
  • Christopher Marshall sold 1,600,595 shares on February 25-27, and currently controls 5,798,818 shares or 6.9% of the company. Christopher Marshall serves as a director of the company.
  • Av Partners VIII LP sold 1,800,000 shares on February 13 - March 1, and currently controls 13,939,174 shares or 16.7% of the company.
  • Brian Sharples sold 122,000 shares on February 13 - March 1, and currently controls 1,263,212 shares or 1.5% of the company. Brian Sharples is one of the Co-Founders and has served as President, Chief Executive Officer and as a member of the board of directors since the company's inception in April 2004.
  • Carl Shepherd sold 10,000 shares on March 1 pursuant to a Rule 10b5-1 Trading Plan. Carl Shepherd currently holds 382,199 shares or 0.5% of the company. Carl Shepherd is one of the Co-Founders and has served as the company's Chief Strategy and Development Officer since February 2005 and as a member of the board of directors since May 2005.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 91,271 0
February 2013 4,360,197 0
January 2013 38,083 0
December 2012 337,173 0
November 2012 324,331 0
October 2012 84,948 0
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The month of February 2013 has seen the most insider selling.

Financials

The company reported the full-year 2012 financial results on February 20, with the following highlights:

Revenue $280.4 million
Net income $15.0 million
Cash $269.8 million
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Outlook

HomeAway management currently expects to achieve the following results for first quarter ending March 31, 2013 and the year ending December 31, 2013, as follows:

First Quarter 2013

  • Total revenue is expected to be in the range of $78.0 million to $79.0 million.
  • Adjusted EBITDA is expected to be in the range of $19.0 million to $20.0 million.

Full-Year 2013

  • Total revenue is expected to be in the range of $339.0 million to $343.0 million.
  • Adjusted EBITDA is expected to be in the range of $97.5 million to $100.5 million.

Competition

HomeAway's competitors include Expedia (NASDAQ:EXPE), priceline.com (NASDAQ:PCLN) and Wyndham Worldwide Corporation (NYSE:WYN). Here is a table comparing these companies.

Company AWAY EXPE PCLN WYN Industry Average (Internet Information Providers)
Market Cap: 2.55B 8.76B 35.95B 8.68B 820.87M
Employees: 1,228 12,330 7,000 32,500 11.70K
Qtrly Rev Growth (yoy): 0.22 0.24 0.20 0.09 0.00
Revenue: 280.40M 4.03B 5.26B 4.53B 282.95M
Gross Margin : 0.84 0.78 0.78 0.54 0.68
EBITDA : 50.69M 642.70M 1.90B 1.05B 56.86M
Operating Margin : 0.11 0.14 0.35 0.19 0.15
Net Income : 14.96M 302.71M 1.42B 400.00M N/A
EPS: 0.18 2.00 27.66 2.75 0.42
P/E: 169.06 32.38 26.06 23.11 87.83
PEG (5 yr expected): 1.65 1.39 0.96 0.87 0.80
P/S: 9.15 2.16 6.82 1.86 2.34
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HomeAway is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been 13 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 169.06 and a forward P/E ratio of 38.52. The company has a book value of $6.23 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are high P/S ratio, high P/E ratio and the intensive insider selling activity.

2. Proofpoint (NASDAQ:PFPT) provides threat protection, regulatory compliance, archiving and governance, and secure communication solutions worldwide.

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Insider selling by insider (last 30 days)

  • Jonathan Feiber sold 58,225 shares on March 5-6, and currently controls 3,047,334 shares or 9.1% of the company. Jonathan Feiber serves as a director of the company.
  • Wade Chambers sold 85,000 shares on March 5, and currently holds 167,320 options or 0.5% of the company. Wade Chambers is Executive Vice President, Engineering.
  • Dana Evan sold 13,657 shares on February 15, pursuant to a Rule 10b5-1 trading plan. Dana Evan currently holds 67,163 options or 0.2% of the company. Dana Evan serves as a director of the company.
  • Eric Hahn sold 2,200 shares on February 15, pursuant to a Rule 10b5-1 trading plan. Eric Hahn currently holds 633,125 shares or 1.9% of the company. Eric Hahn is Founder and Chairman, Proofpoint.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 143,225 0
February 2013 20,857 0
January 2013 41,097 0
December 2012 500,000 0
November 2012 0 0
October 2012 0 0
September 2012 0 0
August 2012 0 0
July 2012 0 0
June 2012 0 0
May 2012 49,458 0
April 2012 347,826 0
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The month of March 2013 has seen the most insider selling since December 2012.

Financials

The company reported the full-year 2012 financial results on January 31, with the following highlights:

Revenue $106.3 million
Net loss $20.5 million
Cash $86.9 million
Debt $4.0 million
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Outlook

As of January 31, 2013 Proofpoint provided guidance for its first quarter and full-year 2013 as follows:

  • First-Quarter 2013 Guidance: Total revenue is expected to be in the range of $29.3 million to $29.5 million. Billings is expected to be in the range of $29.4 million to $29.9 million. Adjusted EBITDA loss is expected to be in the range of $2.8 million to $2.5 million. Non-GAAP EPS loss is expected to be in the range of $0.13 and $0.12 based on approximately 33.3 million weighted average diluted shares outstanding.
  • Full-Year 2013 Guidance: Total revenue is expected to be in the range of $126.0 million to $128.0 million. Billings is expected to be in the range of $144.0 million to $146.0 million. Adjusted EBITDA loss is expected to be in the range of $4.8 million and $4.5 million. Non-GAAP EPS loss is expected to be in the range of $0.36 and $0.35 based on approximately 34.5 million weighted average diluted shares outstanding. Free cash flow, defined as operating cash flow less capital expenditure, is expected to be approximately positive $5.0 million, which assumes capital expenditures of $7.0 million to $8.0 million.

Competition

Proofpoint's competitors include Check Point Software Technologies (NASDAQ:CHKP) and Symantec (NASDAQ:SYMC). Here is a table comparing these companies.

Company PFPT CHKP SYMC Industry Average (Application Software)
Market Cap: 490.36M 10.26B 16.93B 530.94M
Employees: N/A N/A 20,500 611.00
Qtrly Rev Growth (yoy): 0.26 0.03 0.04 0.30
Revenue: 106.29M 1.34B 6.84B 162.53M
Gross Margin : 0.69 0.88 0.84 0.80
EBITDA : -11.96M 761.42M 1.84B 10.90M
Operating Margin : -0.19 0.56 0.17 0.11
Net Income : -20.46M 620.00M 1.14B N/A
EPS : -0.85 2.96 1.58 0.01
P/E : N/A 17.31 15.54 16.79
PEG (5 yr expected): N/A 1.38 1.74 1.10
P/S : 4.66 7.64 2.49 3.27
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Proofpoint is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been four insider sell transactions and there have not been any insider buy transactions during the last 30 days. The company has a book value of $1.02 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. Infoblox (NYSE:BLOX) develops, markets, and sells automated network control solutions worldwide.

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Insider selling by insider (last 30 days)

  • Steve Nye sold 2,500 shares on March 7, pursuant to a Rule 10b5-1 trading plan. Steve Nye currently holds 282,091 options or 0.6% of the company. Steve Nye is Executive Vice President of Product Strategy & Corporate Development.
  • Robert Thomas sold 192,975 shares on February 26 - March 6, and currently holds 888,833 shares or 1.9% of the company. Robert Thomas is President and Chief Executive Officer of the company.
  • Frank Marshall sold 25,000 shares on March 5, and currently controls 51,102 shares or 0.1% of the company. Frank Marshall serves as a director of the company.
  • Christopher Andrews sold 60,000 shares on March 6, and currently holds 121,145 shares or 0.3% of the company. Christopher Andrews is Executive Vice President, Worldwide Field Operations.
  • Sohail Parekh sold 18,400 shares on February 11 - March 4, pursuant to a Rule 10b5-1 trading plan. Sohail Parekh currently holds 30,000 shares or less than 0.1% of the company. Sohail Parekh is Executive Vice President, Engineering.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
March 2013 199,235 0
February 2013 109,240 0
January 2013 84,743 0
December 2012 0 0
November 2012 0 0
October 2012 1,791,273 0
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The month of March 2013 has seen the most insider selling since October 2012.

Financials

The company reported the second-quarter fiscal 2013, which ended January 31, financial results on February 21, with the following highlights:

Revenue $54.4 million
Net loss $3.2 million
Cash $179.8 million
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Outlook

For the third fiscal quarter ending April 30, 2013, the company currently expects:

  • Total net revenue in the range of $55 million to $56.5 million;
  • Non-GAAP gross margin to be approximately 78%;

  • Non-GAAP operating margin in the range of 6% to 7%; and

  • Non-GAAP diluted net income per share to be in the range of $0.06 to $0.07, assuming approximately 54.1 million shares on a non-GAAP diluted weighted average basis.

For the fiscal year ending July 31, 2013, the company currently expects:

  • Total net revenue in the range of $216 million to $219 million;
  • Non-GAAP operating margin in the range of 6% to 7%; and

  • Non-GAAP EPS to be in the range of $0.21 to $0.26, assuming approximately 53.8 million shares on a non-GAAP diluted weighted average basis.

Competition

Infoblox's competitors include Alcatel-Lucent (ALU), Hewlett-Packard (NYSE:HPQ) and International Business Machines (NYSE:IBM). Here is a table comparing these companies.

Company BLOX ALU HPQ IBM Industry Average (Business Services)
Market Cap: 1.06B 3.38B 41.01B 234.47B 1.05B
Employees: 520 N/A 331,800 442,255 3.22K
Qtrly Rev Growth (yoy): 0.32 -0.01 -0.06 -0.01 0.29
Revenue: 192.45M 18.70B 118.68B 104.51B 592.80M
Gross Margin : 0.78 0.30 0.23 0.48 0.41
EBITDA : -3.39M 534.71M 14.30B 26.86B 79.95M
Operating Margin : -0.05 -0.03 0.08 0.21 0.11
Net Income : -11.00M -2.64B -12.89B 16.60B N/A
EPS : -0.29 -0.79 -6.55 14.37 0.64
P/E : N/A N/A N/A 14.64 31.10
PEG (5 yr expected): N/A 0.44 -7.35 1.27 1.15
P/S : 5.47 0.18 0.34 2.23 1.73
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Infoblox is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been 10 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 51.45 and the company has a book value of $3.28 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.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in PFPT 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.