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The Technology Select Sector SPDR ETF (NYSEARCA:XLK) was trading as low as $13.08 in March 2009. The index is currently trading at $31.64 or 141.9% above the low made in March 2009.


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In this article, I will feature two tech stocks that have seen intensive insider selling during the last 30 days. 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%.

1. Texas Instruments (NASDAQ:TXN) engages in the design, manufacture, sale of semiconductors to electronics designers and manufacturers worldwide.


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Insider selling by insider (last 30 days)

  • Niels Anderskouv sold 42,500 shares on July 25 and currently holds 143,573 shares or less than 0.1% of the company. Niels Anderskouv is senior vice president and general manager of High Volume Analog & Logic at Texas Instruments.
  • Carrie Cox sold 15,000 shares on July 25 and currently holds 24,164 shares or less than 0.1% of the company. Carrie Cox serves as a director of the company.
  • David Heacock sold 12,500 shares on July 15-23 pursuant to a Rule 10b5-1 trading plan. David Heacock currently holds 168,652 shares or less than 0.1% of the company. David Heacock is senior vice president and manager of Texas Instruments Silicon Valley Analog.

Insider selling by calendar month

Here is a table of Texas Instruments' insider trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
July 2013 70,000 0
June 2013 0 0
May 2013 905,102 0
April 2013 627,175 0
March 2013 5,000 0
February 2013 448,401 0
January 2013 629,847 0

There have been 2,685,525 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the second-quarter financial results on July 22 with the following highlights:

Revenue $3.1 billion
Net income $660 million
Cash $3.2 billion
Debt $5.2 billion

Outlook

For the third quarter of 2013, TI expects:

  • Revenue: $3.09 billion - $3.35 billion
  • Earnings per share: $0.49 - $0.57

For the full year of 2013, TI expects approximately the following:

● R&D expense: $1.5 billion

● Capital expenditures: $0.5 billion

● Depreciation: $0.9 billion

Competition

TI's competitors include Qualcomm (NASDAQ:QCOM) and STMicroelectronics (NYSE:STM). Here is a table comparing these companies.

Company TXN QCOM STM
Market Cap: 43.53B 109.58B 7.75B
Employees: 34,151 26,600 48,460
Qtrly Rev Growth (yoy): -0.08 0.24 -0.00
Revenue: 12.59B 21.64B 8.48B
Gross Margin: 0.49 0.62 0.32
EBITDA: 3.88B 7.63B 411.00M
Operating Margin: 0.21 0.31 -0.07
Net Income: 1.82B 6.23B -1.15B
EPS: 1.62 3.56 -1.30
P/E: 24.30 17.79 N/A
PEG (5 yr expected): 2.69 0.84 -21.48
P/S: 3.46 5.06 0.91

TI has the second highest P/S ratio among these three companies.

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 0.40%. There are 11 analyst buy ratings, 26 neutral ratings and five sell ratings with an average target price of $38.29. The stock is trading at a P/E ratio of 24.30 and a forward P/E ratio of 18.57. The company has a book value of $9.89 per share and the stock has a dividend yield of 2.85%. 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 bearish analyst target prices and the intensive insider selling activity.

2. Zynga (NASDAQ:ZNGA) develops, markets, and operates online social games as live services on the Internet, social networking sites, and mobile platforms in the United States and internationally.


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Insider selling by insider (last 30 days)

  • Barry Cottle sold 92,371 shares on July 16-22 pursuant to a Rule 10b5-1 plan. Barry Cottle currently holds 32,629 shares or less than 0.1% of the company. Barry Cottle is Chief Revenue Officer of Zynga.
  • Mark Vranesh sold 12,500 shares on July 16 pursuant to a Rule 10b5-1 plan. Mark Vranesh currently controls 934,522 shares or 0.1% of the company. Mark Vranesh is Chief Financial Officer of Zynga.
  • Stanley Meresman sold 5,417 shares on July 1-15 pursuant to a Rule 10b5-1 plan. Stanley Meresman currently controls 38,333 shares or less than 0.1% of the company. Stanley Meresman has served on Zynga's Board since June 2011.
  • Reginald Davis sold 21,270 shares on July 2-16 pursuant to a Rule 10b5-1 plan. Reginald Davis currently holds 166,231 shares or less than 0.1% of the company. Reginald Davis is Executive Vice President, General Counsel.
  • Cadir Lee sold 150,016 shares on July 1-10 pursuant to a Rule 10b5-1 plan. Cadir Lee currently holds 705,908 shares and 4,596,458 options or 0.7% of the company. Cadir Lee is Chief Technology Officer of Zynga.
  • Jeffrey Katzenberg sold 49,500 shares on July 1 pursuant to a Rule 10b5-1 plan. Jeffrey Katzenberg currently controls 41,910 shares or less than 0.1% of the company. Jeffrey Katzenberg has served on Zynga's Board since February 2011.
  • Steven Chiang sold 12,500 shares on July 1 pursuant to a Rule 10b5-1 plan. Steven Chiang currently holds 576,591 shares or less than 0.1% of the company. Steven Chiang is President of Games at Zynga.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
July 2013 343,574 0
June 2013 269,200 0
May 2013 856,347 0
April 2013 350,728 0
March 2013 327,436 0
February 2013 523,728 0
January 2013 332,464 0

There have been 3,003,477 shares sold and there have been zero shares purchased by the insiders this year.

Financials

The company reported the second-quarter financial results on July 25 with the following highlights:

Revenue $231 million
Net loss $16 million
Cash $1.5 billion

Outlook

Zynga's outlook for the third quarter of 2013 is as follows:

  • Revenue is projected to be in the range of $175 million to $200 million.
  • Net loss is projected to be in the range of $43 million to $14 million.

For full year 2013:

  • Zynga is targeting an adjusted EBITDA margin (adjusted EBITDA as a percentage of bookings) of 0% to 5%.

Competition

Zynga's competitors include DeNA Co. (OTC:DNACF) and Electronic Arts (NASDAQ:EA). Here is a table comparing these companies.

Company ZNGA DNACF EA
Market Cap: 2.78B 2.88B 7.46B
Employees: 3,058 2,108 9,300
Qtrly Rev Growth (yoy): -0.18 0.24 -0.12
Revenue: 1.22B 2.57B 3.80B
Gross Margin: 0.73 0.72 0.64
EBITDA: 143.73M 1.05B 325.00M
Operating Margin: -0.00 0.38 0.03
Net Income: -119.96M 579.20M 98.00M
EPS: -0.16 4.22 0.31
P/E: N/A 5.07 79.48
PEG (5 yr expected): -3.32 N/A 1.32
P/S: 2.27 1.12 1.96

Zynga is currently the only one not profitable out of these three companies.

My analysis

There have been seven 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 11.30%. There are two analyst buy ratings, 17 neutral ratings and four sell ratings with an average target price of $3.35. The stock is trading at a forward P/E ratio of 1166.67 and the company has a book value of $2.39 per share. The stock has a $0.75 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with a $2.39 price target, which is the book value. I would place a stop loss at $4.03, which is the 52-week high. The four main reasons for the proposed short entry are bearish Point and Figure chart, bearish analyst target prices, negative earnings and the intensive insider selling activity.

Source: 2 Tech Stocks With Recent Intensive Insider Selling