Insiders Are Selling Splunk And Some Of Its Competitors

Sep.23.13 | About: Splunk Inc. (SPLK)

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%.

Splunk (NASDAQ:SPLK) provides software solutions that provide real-time operational intelligence.

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Insider selling during the last 30 days

  • Nicholas Sturiale sold 65,175 shares on September 5-19 and currently controls 4,708 shares and 42,188 options or less than 0.1% of the company. Nicholas Sturiale serves as a director of the company. Nicholas Sturiale decreased his holdings by 58.2% in September.
  • Godfrey Sullivan sold 50,000 shares on August 21 - September 18 pursuant to a Rule 10b5-1 trading plan. Godfrey Sullivan currently controls 2,466,240 shares and 2,697,515 options or 5.0% of the company. Godfrey Sullivan has served as the company's President, Chief Executive Officer and a member of board of directors since September 2008, and as Chairman since December 2011. Godfrey Sullivan decreased his holdings by 1.0% during the last 30 days.
  • Thomas Neustaetter sold 7,500 shares on August 21 - September 18 pursuant to a Rule 10b5-1 trading plan. Thomas Neustaetter currently holds 98,603 shares or less than 0.1% of the company. Thomas Neustaetter serves as a director of the company. Thomas Neustaetter decreased his holdings by 7.1% during the last 30 days.
  • Thomas Schodorf sold 320,000 shares on August 20 - September 17 pursuant to a Rule 10b5-1 trading plan. Thomas Schodorf currently holds 224,852 shares and 199,087 options or 0.4% of the company. Thomas Schodorf has served as the company's Senior Vice President, Field Operations since October 2009. Thomas Schodorf decreased his holdings by 43.0% during the last 30 days.
  • Graham Smith sold 5,000 shares on September 17 pursuant to a Rule 10b5-1 trading plan. Graham Smith currently holds 119,565 shares or 0.1% of the company. Graham Smith serves as a director of the company. Graham Smith decreased his holdings by 4.0% during the last 30 days.
  • David Conte sold 22,916 shares on September 9 pursuant to a Rule 10b5-1 trading plan. David Conte currently holds 40,000 shares and 537,502 options or 0.6% of the company. David Conte has served as the company's Senior Vice President and Chief Financial Officer since July 2011. David Conte decreased his holdings by 3.8% during the last 30 days.
  • Guido Schroeder sold 8,000 shares on September 3 pursuant to a Rule 10b5-1 trading plan. Guido Schroeder currently holds 40,000 shares and 610,000 options or 0.6% of the company. Guido Schroeder has served as Splunk's Senior Vice President, Products since April 2012. Guido Schroeder decreased his holdings by 1.2% during the last 30 days.
  • Steven Sommer sold 6,000 shares on September 3 pursuant to a Rule 10b5-1 trading plan. Steven Sommer currently controls 458,643 shares or 0.4% of the company. Steven Sommer has served as Chief Marketing Officer and Senior Vice President, Marketing since 2010. Steven Sommer decreased his holdings by 1.3% during the last 30 days.
  • Leonard Stein sold 10,000 shares on September 3 pursuant to a Rule 10b5-1 trading plan. Leonard Stein currently holds 42,669 shares and 288,528 options or 0.3% of the company. Leonard Stein has served as the company's Senior Vice President, General Counsel since April 2011. Leonard Stein decreased his holdings by 2.9% during the last 30 days.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
September 2013 463,591 0
August 2013 115,166 0
July 2013 309,857 0
June 2013 116,971 0
May 2013 121,500 0
April 2013 307,500 0
March 2013 413,513 0
February 2013 94,000 0
January 2013 104,500 0
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There have been 2,046,598 shares sold and there have been zero shares purchased by insiders this year.

Financials

Splunk reported the fiscal 2014 second-quarter, which ended July 31, financial results on August 29 with the following highlights:

Revenue $66.9 million
Net loss $13.7 million
Cash $347.1 million
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Outlook

Splunk provided the following guidance for its fiscal 2014 third quarter (ending October 31, 2013):

  • Total revenues are expected to be between $69 million and $71 million.
  • Non-GAAP operating margin is expected to be between zero and negative 2%.

Splunk updated its previous guidance for fiscal 2014 full year (ending January 31, 2014):

  • Total revenues are expected to be between $275 million and $281 million (were previously expected to be between $266 million and $274 million as of May 30, 2013).
  • Non-GAAP operating margin is expected to be approximately zero (unchanged from May 30, 2013).

Competition

Splunk's principal competitors include:

  • IT departments of potential customers which have undertaken custom software development efforts to analyze and manage their machine data.
  • Security, systems management and other IT vendors, including BMC Software (NASDAQ:BMC), CA Inc. (NASDAQ:CA), Compuware (NASDAQ:CPWR), Hewlett-Packard (NYSE:HPQ), International Business Machines (NYSE:IBM), Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT), Quest Software (NASDAQ:QSFT), TIBCO Software (NASDAQ:TIBX) and VMware (NYSE:VMW).
  • Web analytics vendors, including Adobe Systems (NASDAQ:ADBE), Google (NASDAQ:GOOG), IBM and Webtrends.
  • Business intelligence vendors, including EMC Corporation (NYSE:EMC), IBM, Oracle (NYSE:ORCL) and SAP AG (NYSE:SAP).
  • Companies targeting the big data market by commercializing open source software, such as the various Hadoop distributions and NoSQL data stores.
  • Small specialized vendors, which provide complementary solutions in enterprise data analytics, data warehousing and big data technologies that may compete with Splunk's software.

Here is a table of these competitors' insider-trading activities during the last six months.

Company Insider buying / shares Insider selling / shares
BMC 0 681,885
CA 0 453,537
CPWR 0 28,722
HPQ 0 49,000
IBM 1,000 20,885
INTC 0 2,142,347
MSFT 0 40,263,580
QSFT 0 0
TIBX 0 679,946
VMW 489,618 72,543
ADBE 0 1,749,344
GOOG 0 2,729,900
EMC 0 1,649,598
ORCL 0 4,135,826
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Only IBM and VMware have seen insider buying during the last six months.

Conclusion

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

Splunk is trading at a forward P/E ratio of 512.23 and the company has a book value of $2.38 per share. There are 14 analyst buy ratings, five neutral ratings and zero sell ratings with an average price target of $58.60.

Before entering short Splunk, 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, bearish analyst target prices 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.