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In this article, I will feature one tech stock 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%.

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.

(click to enlarge)

Insider selling during the last 30 days

  • Jeremy Stoppelman sold 58,824 shares on August 26 - September 16 pursuant to a 10b5-1 trading plan. Jeremy Stoppelman currently controls 4,895,096 shares or 7.6% of Yelp. Jeremy Stoppelman is Co-founder and Chief Executive Officer of Yelp. Jeremy Stoppelman decreased his holdings by 1.2% during the last 30 days.
  • Max Levchin sold 140,792 shares on August 26 - September 16 pursuant to a 10b5-1 trading plan. Max Levchin currently controls 5,189,566 shares or 8.0% of Yelp. Max Levchin has served on the board of directors as Chairman since July 2004. Max Levchin decreased his holdings by 2.6% during the last 30 days.
  • Joseph Nachman sold 9,380 shares on September 10 pursuant to a 10b5-1 trading plan. Joseph Nachman currently holds 32,830 shares and 9,380 options or less than 0.1% of Yelp. Joseph Nachman is Senior Vice President of Revenue. Joseph Nachman decreased his holdings by 18.2% during the last 30 days.
  • Geoffrey Donaker sold 25,000 shares on September 10 pursuant to a 10b5-1 trading plan. Geoffrey Donaker currently holds 1,200,514 options or 1.9% of Yelp. Geoffrey Donaker joined Yelp in 2005 to head business development and has been COO since 2006. Geoffrey Donaker decreased his holdings by 2.0% during the last 30 days.
  • Diane Irvine sold 1,500 shares on September 6 and currently holds 2,500 shares or less than 0.1% of Yelp. Diane Irvine serves as a director of Yelp. Diane Irvine decreased her holdings by 37.5% during the last 30 days.
  • Laurence Wilson sold 5,250 shares on September 5 pursuant to a 10b5-1 trading plan. Laurence Wilson currently holds 3,383 shares and 31,500 options or less than 0.1% of Yelp. Laurence Wilson joined Yelp in 2007 as General Counsel. Laurence Wilson decreased his holdings by 13.1% during the last 30 days.
  • Peter Fenton sold 50,000 shares on August 30 and currently controls 1,162,378 shares or 1.8% of Yelp. Peter Fenton serves as a director of Yelp. Peter Fenton decreased his holdings by 4.1% during the last 30 days.
  • Deer VI & Co. sold 2,212,376 shares on August 21-30 and currently controls zero shares of Yelp. Deer VI & Co. decreased its holdings by 100% during the last 30 days.
  • Robert Krolik sold 10,000 shares on August 21 pursuant to a 10b5-1 trading plan. Robert Krolik currently holds 114,156 shares and 55,000 options or 0.3% of Yelp. Robert Krolik is Chief Financial Officer of Yelp. Robert Krolik decreased his holdings by 5.6% during the last 30 days.
  • Fred Anderson sold 7,500 shares on August 20 and currently controls 94,307 shares or 0.1% of Yelp. Fred Anderson serves as a director of Yelp. Fred Anderson decreased his holdings by 7.4% during the last 30 days.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
September 2013190,8420
August 20139,183,4080
July 2013336,6500
June 2013409,2460
May 20132,307,9060
April 2013300,7590
March 2013778,6500
February 20131,125,8110
January 201353,1300

There have been 14,686,402 shares sold and there have been zero shares purchased by insiders this year.

Financials

Yelp reported the second-quarter financial results on July 31 with the following highlights:

Revenue$55.0 million
Net loss$0.9 million
Cash$96.8 million

Outlook

As of July 31, Yelp provided guidance for its third quarter of 2013 and raised its full year 2013 revenue and adjusted EBITDA guidance.

  • For the third quarter of 2013, net revenue is expected to be in the range of $58 million to $59 million. Adjusted EBITDA is expected to be in the range of $7.5 million to $8.0 million.
  • For the full year of 2013, net revenue is expected to be in the range of $222 million to $224 million, representing growth of approximately 62% compared to the full year of 2012. Adjusted EBITDA is expected to be in the range of $27 million to $28 million.

Competition

Yelp's competitors include Yahoo! (NASDAQ:YHOO) and Google (NASDAQ:GOOG). Here is a table comparing these three companies.

CompanyYELPGOOGYHOO
Market Cap:4.57B300.75B31.55B
Employees:1,53644,77711,700
Qtrly Rev Growth (yoy):0.690.20-0.07
Revenue:178.68M55.80B4.82B
Gross Margin:0.930.570.69
EBITDA:-2.12M17.00B1.28B
Operating Margin:-0.050.240.16
Net Income:-13.01M10.94B4.15B
EPS:-0.2134.573.63
P/E:N/A26.138.51
PEG (5 yr expected):-31.831.381.79
P/S:25.765.366.56

Yelp has the highest P/S ratio among these three companies. In Google, there have been 2,729,900 shares sold and there have been zero shares purchased by insiders during the last six months. In Yahoo, there have been 41,450,458 shares sold and there have been zero shares purchased by insiders during the last six months.

Conclusion

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

There are 11 analyst buy ratings, 12 neutral ratings and zero sell ratings with an average price target of $52.37. Yelp is trading at a forward P/E ratio of 297.96 and the company has a book value of $2.70 per share.

Before entering short Yelp, I would like to get a bearish confirmation from the Point and Figure chart. The four main reasons for the proposed short entry are negative earnings, high P/S ratio, bearish analyst target prices and the intensive insider selling activity.

Source: Insiders Are Selling Yelp