2 Tech Stocks And 1 Services Company With Recent Intensive Insider Selling

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Includes: TGT, WIFI, YELP
by: Markus Aarnio

There was intensive insider selling in Boingo Wireless (NASDAQ:WIFI) in March 2012. The stock peaked at $13.25 on March 29, 2012 and is currently trading at $6.80 or 48.7% below the March 2012 all time high.

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With this episode in mind, I screened for 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 stocks that met these three criteria of intensive insider selling in the last 30 days.

1. 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)

  • Laurence Wilson sold 145,500 shares on May 15 - June 5 pursuant to a duly adopted 10b5-1 trading plan. Laurence Wilson currently holds 47,250 options or less than 0.1% of Yelp. Laurence Wilson joined Yelp in 2007 as General Counsel.

  • Max Levchin sold 175,990 shares on May 6 - June 3 pursuant to a duly adopted 10b5-1 trading plan. Max Levchin currently controls 5,717,536 shares or 8.9% of Yelp. Max Levchin has served on the board of directors as Chairman since July 2004.

  • Jeremy Stoppelman sold 58,824 shares on May 13 - June 3 pursuant to a duly adopted 10b5-1 trading plan. Jeremy Stoppelman currently controls 5,115,686 shares or 7.9% of Yelp. Jeremy Stoppelman is Co-founder and Chief Executive Officer of Yelp.

  • Deer VI & Co. sold 974,392 shares on May 6-29 and currently controls 6,493,422 shares or 10.1% of Yelp.
  • Keith Rabois sold 25,665 shares on May 21 and currently holds zero shares of Yelp. Keith Rabois has served on the board of directors since September 2005.
  • Robert Krolik sold 7,500 shares on May 20 pursuant to a duly adopted 10b5-1 trading plan. Robert Krolik currently holds 120,180 shares or 0.2% of Yelp. Robert Krolik is Chief Financial Officer of the company.
  • Benchmark Capital Management Co. V, L.L.C. sold 7,895 shares on May 20 and currently controls 2,906,084 shares or 4.5% of Yelp.
  • Elevation Partners, L.P. sold 1,057,914 shares on May 13-17 and currently controls zero shares of Yelp.
  • Joseph Nachman sold 9,380 shares on May 10 pursuant to a Rule 10b5-1 trading plan. Joseph Nachman currently holds 59,355 options and 32,830 shares or 0.1% of the company. Joseph Nachman is Senior Vice President of Revenue.
  • Geoffrey Donaker sold 35,000 shares on May 10 pursuant to a Rule 10b5-1 trading plan. Geoffrey Donaker currently holds 342,708 shares or 0.5% of the company. Geoffrey Donaker joined Yelp in 2005 to head business development and has been COO since 2006.

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
June 2013 190,154 0
May 2013 2,307,906 0
April 2013 300,759 0
March 2013 778,650 0
February 2013 1,125,811 0
January 2013 53,130 0
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The month of May has seen the most insider selling this year.

Financials

The company reported the first-quarter financial results on May 1 with the following highlights:

Revenue $46.1 million
Net loss $4.8 million
Cash $94.5 million
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Outlook

As of May 1, Yelp provided guidance for the second quarter and full year of 2013.

  • For the second quarter of 2013, net revenue is expected to be in the range of $52.5 million - $53.5 million representing growth of approximately 62% compared to the second quarter of 2012. Adjusted EBITDA is expected to be in the range of $4.5 million - $5.0 million.
  • For the full year of 2013, net revenue is expected to be in the range of $216 million - $218 million, representing growth of approximately 58% compared to the full year of 2012. Adjusted EBITDA is expected to be in the range of $21 million - $23 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: 1.81B 27.88B 2.07B
Employees: 1,479 11,700 20.88K
Qtrly Rev Growth (yoy): 0.69 -0.07 1.71
Revenue: 156.32M 4.91B 420.42M
Gross Margin: 0.93 0.68 0.72
EBITDA: -4.45M 1.33B 32.31M
Operating Margin: -0.07 0.16 0.19
Net Income: -14.11M 4.05B N/A
EPS: -0.23 3.45 0.37
P/E: N/A 7.46 21.79
PEG (5 yr expected): -9.37 1.35 0.68
P/S: 11.63 5.68 4.81
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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 nine different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 12.63%. The stock is trading at a forward P/E ratio of 176.25 and the company has a book value of $2.57 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 negative earnings, relatively high P/S ratio and the intensive insider selling activity.

2. Target Corporation (NYSE:TGT) operates general merchandise stores in the United States.

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Insider selling by insider (last 30 days)

  • Anthony Fisher sold 709 shares on June 6 and currently holds 22,771 shares or less than 0.1% of the company. Anthony Fisher is president of Target Canada.

  • Laysha Ward sold 2,277 shares on June 5 and currently holds 19,897 shares or less than 0.1% of the company. Laysha Ward is President, Community Relations and Target Foundation.
  • Jodee Kozlak sold 67,455 shares on June 4 and currently holds 36,406 shares or less than 0.1% of the company. Jodee Kozlak is Executive Vice President, Human Resources.
  • John Mulligan sold 17,093 shares on May 31 and currently holds 37,114 shares or less than 0.1% of the company. John Mulligan is Executive Vice President and Chief Financial Officer.
  • Beth Jacob sold 15,474 shares on May 30 and currently holds 41,601 shares or less than 0.1% of the company. Beth Jacob is Executive Vice President, Target Technology Services and Chief Information Officer.
  • Timothy Baer sold 10,832 shares on May 28 and currently holds 39,395 shares or less than 0.1% of the company. Timothy Baer is Executive Vice President, General Counsel and Corporate Secretary.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
June 2013 70,441 0
May 2013 43,399 0
April 2013 199,606 0
March 2013 409,988 0
February 2013 0 0
January 2013 34,349 0
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There have been 757,783 shares sold and zero shares purchased this year.

Financials

The company reported the first-quarter financial results on May 22 with the following highlights:

Revenue $16.7 billion
Net income $498 million
Cash $1.8 billion
Debt $14.2 billion
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Outlook

The company's guidance is as follows:

  • In second quarter 2013, the company expects adjusted EPS of $1.09 to $1.19 and GAAP EPS of $0.90 to $1.00.
  • For full-year 2013, the company expects adjusted EPS of $4.70 to $4.90, compared with prior guidance of $4.85 to $5.05. GAAP EPS is expected to be $4.12 to $4.32, approximately 58 cents lower than adjusted EPS.

Competition

Target's competitors include Costco Wholesale Corporation (NASDAQ:COST) and Wal-Mart Stores (NYSE:WMT). Here is a table comparing these companies.

Company TGT COST WMT
Market Cap: 45.09B 48.49B 249.65B
Employees: 361,000 96,000 2,000,000
Qtrly Rev Growth (yoy): -0.01 0.08 0.01
Revenue: 73.14B 104.89B 470.34B
Gross Margin: 0.29 0.13 0.25
EBITDA: 7.64B 3.99B 36.46B
Operating Margin: 0.08 0.03 0.06
Net Income: 2.80B 2.03B 17.04B
EPS: 4.26 4.62 5.08
P/E: 16.51 24.03 14.90
PEG (5 yr expected): 1.45 1.81 1.54
P/S: 0.62 0.46 0.53
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Target's P/S ratio is above its direct competitors'.

My analysis

There have been six different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 0.18%. The stock is trading at a P/E ratio of 16.51 and a forward P/E ratio of 12.89. The company has a book value of $25.76 per share and the stock has a dividend yield of 2.05%. 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. Boingo Wireless provides mobile Wi-Fi Internet solutions.

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Insider selling by insider (last 30 days)

  • Mitsui & Co Ltd (OTCPK:MITSY) sold 241,750 shares on May 8 - June 4 and currently controls 3,940,360 shares or 11.0% of the company.
  • Peter Hovenier sold 20,000 shares on May 10-20 pursuant to a Rule 10b5-1 trading plan. Peter Hovenier currently holds 45,783 options or 0.1% of the company. Peter Hovenier is Chief Financial Officer of the company.
  • David Hagan sold 15,000 shares on May 13 pursuant to a Rule 10b5-1 trading plan. David Hagan currently holds 6,420 options or less than 0.1% of the company. David Hagan is President and Chief Executive Officer of the company.

Insider selling by calendar month

Here is a table of Boingo Wireless' insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
June 2013 35,700 0
May 2013 276,750 0
April 2013 248,268 0
March 2013 0 0
February 2013 124,419 0
January 2013 89,750 0
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The month of May has seen the most insider selling this year.

Financials

The company reported the first-quarter financial results on May 9 with the following highlights:

Revenue $23.1 million
Net loss $1.1 million
Cash $91.9 million
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Outlook

Boingo Wireless' guidance for the second quarter is as follows:

  • Revenue is expected to be in the range of $23.5 million to $25.5 million.
  • Adjusted EBITDA is expected to be in the range of $4.5 million to $6.0 million.
  • Net loss attributable to common stockholders is expected to be in the range of ($1.5) million to ($0.5) million, or a loss of ($0.04) to $0.00 per diluted share.

Boingo Wireless' guidance for the full year is as follows:

  • Revenue is expected to be in the range of $106.0 million to $110.0 million.
  • Adjusted EBITDA is expected to be in the range of $28.5 million to $31.5 million.
  • Net income attributable to common stockholders is expected to be in the range of $1.0 million to $3.0 million, or $0.03 to $0.08 per diluted share.

Competition

Boingo Wireless' competitors include iPass (NASDAQ:IPAS). Here is a table comparing these two companies.

Company WIFI IPAS Industry Average (Information Technology Services)
Market Cap: 242.55M 102.58M 603.49M
Employees: 160 358 8.67K
Qtrly Rev Growth (yoy): -0.04 -0.11 0.44
Revenue: 101.45M 122.41M 3.80B
Gross Margin: 0.44 0.41 0.29
EBITDA: 22.69M -2.70M 1.34B
Operating Margin: 0.07 -0.04 0.02
Net Income: 4.52M -6.48M N/A
EPS: 0.12 -0.11 1.69
P/E: 55.28 N/A 10.14
PEG (5 yr expected): 8.71 -2.27 1.28
P/S: 2.39 0.84 0.48
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Boingo Wireless is trading above the industry average P/S ratio, which could explain some of the insider selling.

My analysis

There have been three different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. The company has an insider ownership of 37.93%. The stock is trading at a P/E ratio of 55.28 and a forward P/E ratio of 48.57. The company has a book value of $4.13 per share and a cash position of $2.58 per share. I believe there is an opportunity for a short entry with a $4.13 price target, which is the book value. I would place a stop loss at $8.11, which is the six-month high. The four main reasons for the proposed short entry are relatively high P/S ratio, relatively high P/E ratio, bearish Point and Figure chart and the intensive insider selling activity.

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