Insiders Are Selling Ubiquiti Networks

Sep.16.13 | About: Ubiquiti Networks, (UBNT)

In this article, I will feature one wireless communications company that has 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%.

Ubiquiti Networks (NASDAQ:UBNT) offers a portfolio of networking products and solutions for service providers and enterprises.

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Insider selling during the last 30 days

  • Summit Partners L P sold 3,800,000 shares on September 4-11, and currently controls 4,764,079 shares or 5.5% of Ubiquiti Networks. Summit Partners L P decreased its holdings by 44.4% in September.
  • Jessica Zhou sold 5,561 shares on September 3, and currently holds 104,439 shares or 0.1% of the company. Jessica Zhou serves as Ubiquiti's General Counsel and Vice President of Legal Affairs. Jessica Zhou decreased her holdings by 5.1% in September.
  • Robert Van Buskirk sold 20,831 shares on September 3, and currently holds 29,169 shares or less than 0.1% of the company. Robert Van Buskirk serves as a director of the company. Robert Van Buskirk decreased his holdings by 41.7% in September.
  • John Sanford sold 15,000 shares on August 20, pursuant to a Rule 10b5-1 plan. John Sanford currently holds 370,545 shares or 0.4% of the company. John Sanford is chief technology officer. John Sanford decreased his holdings by 3.9% in September.

Insider selling by calendar month

Here is a table of Ubiquiti Networks' insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
September 2013 3,826,392 0
August 2013 15,000 0
July 2013 15,000 0
June 2013 7,041,464 0
May 2013 10,000 0
April 2013 10,000 0
March 2013 1,010,000 0
February 2013 10,000 0
January 2013 10,000 0
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There have been 11,947,856 shares sold and there have been zero shares purchased by insiders this year.

Financials

Ubiquiti reported the full fiscal year 2013, which ended June 30, financial results on August 8, with the following highlights:

Revenue $320.8 million
Net income $80.5 million
Cash $227.8 million
Debt $76.1 million
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Outlook

Ubiquiti's guidance for the fiscal 2014 first quarter ending September 30, is as follows:

  • Revenues of between $116 million and $122 million.
  • GAAP Diluted EPS of between $0.37 and $0.40.
  • Non-GAAP Diluted EPS of between $0.38 and $0.41.

Competition

Ubiquiti's competitors include Alvarion (NASDAQ:ALVR) and PC-Tel (NASDAQ:PCTI). Here is a table comparing these companies.

Company UBNT ALVR PCTI Industry Average (Wireless Communications)
Market Cap: 2.81B 3.92M 156.20M 2.39B
Employees: N/A 356 467 4.96K
Qtrly Rev Growth (yoy): 0.07 -0.74 0.34 0.22
Revenue: 320.82M 42.87M 103.51M 1.63B
Gross Margin: 0.42 0.30 0.39 0.41
EBITDA: 94.29M -16.87M 4.78M 337.36M
Operating Margin: 0.29 -0.47 -0.01 0.10
Net Income: 80.49M -23.11M -7.01M N/A
EPS: 0.89 -8.93 -0.34 0.07
P/E: 36.01 N/A N/A 16.35
PEG (5 yr expected): 0.59 N/A 2.08 1.42
P/S: 8.80 0.08 1.49 1.13
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Ubiquiti is trading above the industry average P/S ratio, which could explain some of the insider selling. PC-Tel has seen seven insider sell transactions and three insider buy transactions this year.

Conclusion

There have been four different insiders selling Ubiquiti and there have not been any insiders buying Ubiquiti during the past 30 days. Two of these four insiders decreased their holdings by more than 10%.

Ubiquiti is trading at a P/E ratio of 36.01 and a forward P/E ratio of 17.19. The company has a book value of $1.68 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 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.