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The technology sector has been the second worst-performing group over the recent one year period with a gain of just 3.2%.

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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. E2open (NASDAQ:EOPN) develops, operates, and markets an integrated cloud-based platform for supply chain management.

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Insider selling by insider (last 30 days)

  • Robert Schoenthaler sold 24,500 shares on March 19 - April 8 pursuant to a Rule 10b5-1 trading plan. Robert Schoenthaler currently holds 50,212 options or 0.2% of the company. Robert Schoenthaler is Senior Vice President, Customer Solutions.
  • Lorenzo Martinelli sold 1,469 shares on March 20 - April 3 pursuant to a Rule 10b5-1 trading plan. Lorenzo Martinelli currently controls 170,396 shares or 0.7% of the company. Lorenzo Martinelli is Senior Vice President, Corporate Strategy.
  • David Hale sold 3,500 shares on March 21-28 pursuant to a Rule 10b5-1 trading plan. David Hale currently controls 3,071 shares or less than 0.1% of the company. David Hale joined E2open in 2000, and currently serves as Chief Information Officer.

Insider selling by calendar month

Here is a table of E2open's insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 20139,5020
March 2013142,0260
February 2013204,0920
January 2013235,5000

There have been 591,120 shares sold and zero shares purchased this year.

Financials

The company reported the fiscal 2013 third-quarter, which ended November 30, 2012, financial results on January 2 with the following highlights:

Revenue$19.0 million
Net loss$0.1 million
Cash$33.5 million
Debt$1.1 million
Outlook

As of January 2, 2013, E2open provided guidance for its fourth quarter of fiscal 2013 as well as the full fiscal year 2013:

  • Fourth Quarter Fiscal 2013 Guidance: Total GAAP revenue is expected to be in the range of $18.9 million to $19.3 million. Non-GAAP revenue is expected to be in the range of $19.4 million to $19.8 million. Non-GAAP loss from operations is expected to be in the range of $1.4 million to $0.9 million.
  • Full Year Fiscal 2013 Guidance: Total GAAP revenue is expected to be in the range of $76.3 million to $76.7 million. Total non-GAAP revenue is expected to be in the range of $72.7 million to $73.1 million. Non-GAAP loss from operations is expected to be in the range of $1.3 million to $0.8 million. Bookings are expected to be in the range of $94.0 million to $98.0 million, representing growth of approximately 30% to 35% compared to fiscal 2012.

Competition

E2open's competitors include Oracle (NYSE:ORCL) and SAP AG (NYSE:SAP). Here is a table comparing these companies.

CompanyEOPNORCLSAPIndustry Average (Application Software)
Market Cap:517.80M157.62B92.95B232.11M
Employees:370115,00064,422449.00
Qtrly Rev Growth (yoy):0.28-0.010.120.23
Revenue:74.35M37.15B21.00B101.85M
Gross Margin:0.690.800.710.70
EBITDA:4.39M17.29B7.09B3.97M
Operating Margin:0.040.390.280.05
Net Income:2.97M10.57B3.65BN/A
EPS:0.082.153.07N/A
P/E:251.9515.5825.4427.71
PEG (5 yr expected):-11.761.171.541.12
P/S:6.944.264.482.97

E2open's P/S ratio is above the industry average, which could explain some of the insider selling.

My analysis

There have been 11 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 251.95 and a forward P/E ratio of 516.50. The company has a book value of $0.81 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/E ratio, relatively high P/S ratio and the intensive insider selling activity.

2. Verint Systems (NASDAQ:VRNT) provides Actionable Intelligence solutions and value-added services worldwide.

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Insider selling by insider (last 30 days)

  • Dan Bodner sold 42,628 shares on April 5-11 and currently holds 358,926 shares or 0.7% of the company. Dan Bodner serves as President, Chief Executive Officer, a director, and Corporate Officer.
  • Peter Fante sold 16,326 shares on April 2-11 and currently holds 17,472 shares or less than 0.1% of the company. Peter Fante is a Corporate Officer, Chief Legal Officer, and Chief Compliance Officer of Verint Systems.
  • David Parcell sold 14,017 shares on April 5-11 and currently holds 5,585 shares or less than 0.1% of the company. David Parcell is Managing Director for Verint Systems EMEA (Europe, Middle East and Africa) and a Corporate Officer.
  • Elan Moriah sold 40,054 shares on April 2-11 and currently holds 25,229 shares or less than 0.1% of the company. Elan Moriah is a corporate officer and President of Verint Enterprise Intelligence Solutions and Verint Video Intelligence Solutions.
  • Douglas Robinson sold 10,822 shares on April 5-11 and currently holds 91,019 shares or 0.2% of the company. Douglas Robinson has been Chief Financial Officer of the company since December 2006.

Insider selling by calendar month

Here is a table of Verint Systems' insider trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 2013123,8470
March 201300
February 201300
January 201310,0000

The month of April has seen the most insider selling.

Financials

The company reported the full year, which ended January 31, financial results on March 27 with the following highlights:

Revenue$839.5 million
Net income$38.5 million
Cash$210.0 million
Debt$576.7 million

Outlook

Below is Verint's non-GAAP outlook for the year ending January 31, 2014.

• Verint expects revenue to increase between 6% and 7% compared to the year ended January 31, 2013.

• Verint expects fully diluted earnings per share in the range of $2.75 plus or minus 5 cents.

• While this is Verint's annual outlook, there are seasonal trends in the enterprise software industry, and therefore Verint expects Q1 to be down sequentially from Q4 levels both in terms of revenue and profitability.

Competition

Verint's competitors include NICE Systems (NASDAQ:NICE). Here is a table comparing these two companies.

CompanyVRNTNICEIndustry Average (Business Software & Services)
Market Cap:1.81B2.12B117.68M
Employees:3,2003,400690.00
Qtrly Rev Growth (yoy):0.080.110.21
Revenue:839.54M879.01M94.95M
Gross Margin:0.680.600.42
EBITDA:162.16M141.79M5.87M
Operating Margin:0.130.050.06
Net Income:38.53M67.89MN/A
EPS:0.961.090.13
P/E:35.8432.1722.99
PEG (5 yr expected):1.001.081.28
P/S:2.152.411.74

Verint's valuation is in line with the industry average.

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 35.84 and a forward P/E ratio of 11.32. The company has a book value of $12.70 per share. Before entering short this stock, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is the intensive insider selling activity.

3. Semtech Corporation (NASDAQ:SMTC) designs, develops, manufactures, and markets analog and mixed signal semiconductor products.

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Insider selling by insider (last 30 days)

  • Michael Wilson sold 50,000 shares on April 9 and currently holds 33,316 shares or less than 0.1% of the company. Michael Wilson was appointed Executive Vice President, Quality & Reliability in 2013.
  • Jeffrey Pohlman sold 32,000 shares on April 9 and currently holds 136,611 shares or 0.2% of the company. Jeffrey Pohlman is the Executive Vice President And General Manager, Protection & Power and Hi-Rel Products.
  • Alain Dantec sold 20,826 shares on March 19 - April 4 and currently holds zero shares of the company. Alain Dantec is Senior Vice President and General Manager, Wireless & Sensing Product Group.
  • Mohan Maheswaran sold 26,000 shares on March 19 - April 5 pursuant to a Rule 10b5-1 trading plan. Mohan Maheswaran currently holds 171,662 shares or 0.3% of the company. Mohan Maheswaran joined Semtech as President and Chief Executive Officer in April 2006.
  • James Kim sold 3,075 shares on April 1 pursuant to a Rule 10b5-1 trading plan. James Kim currently holds 11,645 shares or less than 0.1% of the company. James Kim was appointed as the Senior Vice President of Worldwide Sales and Marketing on January 26, 2007.
  • James Lindstrom sold 5,000 shares on March 20 and currently holds 20,000 shares or less than 0.1% of the company. James Lindstrom serves as a director of the company.
  • W. Dean Baker sold 5,000 shares on March 15 pursuant to a Rule 10b5-1 trading plan. W. Dean Baker currently holds zero shares of the company. W. Dean Baker serves as a director of the company.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
April 2013112,9010
March 2013110,0740
February 20138,5000
January 201341,5000

The month of April has seen the most insider selling.

Financials

The company reported the fiscal year 2013, which ended January 27, financial results on March 6 with the following highlights:

Revenue$578.8 million
Net income$41.9 million
Cash$236.1 million
Debt$330.7 million

Outlook

The company's first quarter of fiscal year 2014 outlook is as follows:

  • Net sales are expected to be in the range of $154.0 million to $162.0 million.
  • GAAP earnings are expected to be in the range of 17 to 24 cents per diluted share.
  • Non-GAAP earnings are expected to be in the range of 43 to 49 cents per diluted share.

Competition

Semtech's competitors include Analog Devices (NASDAQ:ADI), STMicroelectronics (NYSE:STM) and Texas Instruments (NASDAQ:TXN). Here is a table comparing these companies.

 

 

 

 

CompanySMTCADISTMTXNIndustry Average (Semiconductor - Integrated Circuits)
Market Cap:2.22B13.64B6.94B39.61B334.36M
Employees:1,4339,20048,46034,151728.00
Qtrly Rev Growth (yoy):0.45-0.04-0.01-0.130.15
Revenue:578.83M2.68B8.49B12.82B203.91M
Gross Margin:0.610.640.330.500.46
EBITDA:116.47M923.85M370.00M4.00B13.88M
Operating Margin:0.120.30-0.080.210.02
Net Income:41.94M643.08M-1.16B1.73BN/A
EPS:0.622.09-1.311.51N/A
P/E:53.4821.35N/A23.7423.67
PEG (5 yr expected):1.536.3026.632.890.97
P/S:3.845.100.823.091.43

Semtech's P/S ratio is above the industry average, 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 P/E ratio of 53.48 and a forward P/E ratio of 12.51. The company has a book value of $10.43 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 relatively high P/S ratio and the intensive insider selling activity.

Source: 2 Software Companies And A Semiconductor With Recent Intensive Insider Selling