2 Tech Stocks With Recent Intensive Insider Selling

|
 |  Includes: AKAM, AMZN, XLK
by: Markus Aarnio

The Technology Select Sector SPDR ETF (NYSEARCA:XLK) was trading as low as $13.08 in March 2009. The index is currently trading at $32.01 or 144.7% above the low made in March 2009.

Click to enlarge

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. Amazon.com (NASDAQ:AMZN) operates as an online retailer in North America and internationally.

Click to enlarge

Insider selling by insiders (last 30 days)

  • Jeffrey Bezos sold 1,000,000 shares on August 1-6 pursuant to a Rule 10b5-1 trading plan. Jeffrey Bezos currently holds 85,970,020 shares or 18.9% of the company. Jeffrey Bezos is President, Chief Executive Officer and Chairman of the Board.
  • Thomas Szkutak sold 10,000 shares on August 1 pursuant to a Rule 10b5-1 trading plan. Thomas Szkutak currently holds 52,707 shares or less than 0.1% of the company. Thomas Szkutak is Senior Vice President and Chief Financial Officer.
  • Jeffrey Wilke sold 7,863 shares on August 1 pursuant to a Rule 10b5-1 trading plan. Jeffrey Wilke currently controls 92,155 shares or less than 0.1% of the company. Jeffrey Wilke has served as Senior Vice President, Consumer Business, since February 2012.
  • William Gordon sold 1,076 shares on August 1 pursuant to a Rule 10b5-1 trading plan. William Gordon currently holds 3,333 shares or less than 0.1% of the company. William Gordon has been a director since April 2003.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
August 2013 1,018,939 0
July 2013 0 0
June 2013 2,500 0
May 2013 48,077 0
April 2013 0 0
March 2013 0 0
February 2013 242,781 0
January 2013 0 0
Click to enlarge

There have been 1,312,297 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 $15.7 billion
Net loss $7 million
Cash $7.5 billion
Debt $3.0 billion
Click to enlarge

Outlook

The company's third quarter guidance is as follows:

  • Net sales are expected to be between $15.45 billion and $17.15 billion, or to grow between 12% and 24% compared with third quarter 2012.
  • Operating loss is expected to be between $440 million and $65 million, compared to $28 million in third quarter 2012.

Competition

Amazon's competitors include Apple (NASDAQ:AAPL) and Barnes & Noble (NYSE:BKS). Here is a table comparing these companies.

Company AMZN AAPL BKS
Market Cap: 137.41B 422.68B 1.08B
Employees: 88,400 72,800 33,850
Qtrly Rev Growth (yoy): 0.22 0.01 -0.07
Revenue: 66.85B 169.40B 6.84B
Gross Margin: 0.26 0.38 0.25
EBITDA: 2.92B 55.87B 29.63M
Operating Margin: 0.01 0.29 -0.03
Net Income: -101.00M 37.75B -175.84M
EPS: -0.23 40.11 -3.02
P/E: N/A 11.60 N/A
PEG (5 yr expected): 9.57 0.65 0.10
P/S: 2.06 2.50 0.16
Click to enlarge
Click to enlarge

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

My analysis

There have been four different insiders selling the shares and there have not been any insiders buying the shares during the past 30 days. Two out of these four insiders decreased their holdings by more than 10%. The company has an insider ownership of 19.10%. The stock is trading at a forward P/E ratio of 106.95 and the company has a book value of $19.15 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 the negative earnings and the intensive insider selling activity.

2. Akamai Technologies (NASDAQ:AKAM) provides content delivery and cloud infrastructure services for accelerating and improving the delivery of content and applications over the Internet in the United States and internationally.

Click to enlarge

Insider selling by insiders (last 30 days)

  • Robert Hughes sold 100,000 shares on July 29-31 pursuant to a Rule 10b5-1 Plan. Robert Hughes currently holds 77,620 shares or less than 0.1% of the company. Robert Hughes is President of Worldwide Operations at Akamai.
  • James Benson sold 24,875 shares on July 12-29 pursuant to a Rule 10b5-1 Plan. James Benson currently holds 13,320 shares and 1,563 options or less than 0.1% of the company. James Benson is Executive Vice President & Chief Financial Officer at Akamai.
  • Rick McConnell sold 5,907 shares on July 26 pursuant to a Rule 10b5-1 Plan. Rick McConnell currently holds 6,203 shares and 71,464 options or less than 0.1% of the company. Rick McConnell is President of Products and Development at Akamai.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
July 2013 155,782 0
June 2013 30,592 0
May 2013 51,750 0
April 2013 0 0
March 2013 38,893 30,000
February 2013 0 77,325
January 2013 6,000 0
Click to enlarge

There have been 283,017 shares sold and there have been 107,325 shares purchased by the insiders this year.

Financials

The company reported the second-quarter financial results on July 24 with the following highlights:

Revenue $378 million
Net income $62 million
Cash $1.1 billion
Click to enlarge

Outlook

The company expects third quarter revenue in the range of $380 million to $392 million. This range represents 15% to 18% year-over-year growth. The company expects non-GAAP EPS in the range of $0.44 to $0.47 for the third quarter.

Competition

Akamai's competitors include Level 3 Communications (NASDAQ:LVLT) and Limelight Networks (NASDAQ:LLNW). Here is a table comparing these three companies.

Company AKAM LVLT LLNW
Market Cap: 8.23B 4.79B 222.10M
Employees: 3,453 10,800 511
Qtrly Rev Growth (yoy): 0.14 -0.01 0.03
Revenue: 1.47B 6.35B 181.73M
Gross Margin: 0.72 0.60 0.53
EBITDA: 552.62M 1.44B -3.46M
Operating Margin: 0.27 0.11 -0.20
Net Income: 249.90M -324.00M -28.47M
EPS: 1.37 -1.48 -0.32
P/E: 33.77 N/A N/A
PEG (5 yr expected): 1.73 -13.04 -2.69
P/S: 5.60 0.75 1.22
Click to enlarge
Click to enlarge

Akamai has the 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. Two out of these three insiders decreased their holdings by more than 10%. The company has an insider ownership of 0.80%. The stock is trading at a P/E ratio of 33.77 and a forward P/E ratio of 20.81. The company has a book value of $13.76 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 the relatively high P/S ratio and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.