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In this article, I will feature one services sector 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%.

Netflix (NASDAQ:NFLX) provides Internet television network service that enables subscribers to stream TV shows and movies directly on TVs, computers, and mobile devices in the United States and internationally.

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Insider selling during the last 30 days

Here is a table of Netflix' insider-trading activity during the last 30 days by insider.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Jonathan FriedlandCCOSep 20 - Oct 1508Yes0 shares + 231 options68.7%
Leslie KilgoreDirectorSep 23 - Oct 25,955Yes14,028 shares + 154 options29.6%
Reed HastingsCEOSep 2415,238Yes1,022,215 shares1.5%

There have been 21,701 shares sold by insiders during the last 30 days. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

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

MonthInsider selling / sharesInsider buying / shares
October 20133,2460
September 201330,4340
August 201336,2350
July 201352,4260
June 201315,9880
May 2013152,9850
April 2013512,8140
March 20137500
February 20131,6040
January 2013398,9710

There have been 1,205,453 shares sold and there have been zero shares purchased by insiders this year.

Financials

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

Revenue$1.1 billion
Net income$29.5 million
Cash$1.1 billion
Debt$500.0 million

Outlook

Netflix expects Q3 net income of $18 million to $34 million.

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Competition

Netflix' competitors include Amazon.com (NASDAQ:AMZN). Here is a table comparing these two companies.

CompanyNFLXAMZN
Market Cap:17.73B142.04B
Employees:2,04588,400
Qtrly Rev Growth (yoy):0.200.22
Revenue:3.94B66.85B
Gross Margin:0.280.26
EBITDA:171.88M2.92B
Operating Margin:0.030.01
Net Income:47.73M-101.00M
EPS:0.80-0.23
P/E:374.66N/A
PEG (5 yr expected):8.869.84
P/S:4.542.09

Netflix is trading at a higher P/S ratio than Amazon.com.

Here is a table of Amazon.com's insider-trading activity this year.

MonthInsider selling / sharesInsider buying / shares
September 20135,0000
August 20131,056,8780
July 201300
June 20132,5000
May 201348,0770
April 201300
March 201300
February 2013242,7810
January 201300

There have been 1,355,236 shares sold and there have been zero shares purchased by Amazon.com's insiders this year. Only Netflix has seen intensive insider selling during the past 30 days.

Conclusion

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

There are seven analyst buy ratings, 22 neutral ratings, and six sell ratings with an average price target of $242.55. Netflix is trading at a P/E ratio of 374.66 and a forward P/E ratio of 89.81. The company has a book value of $18.76 per share.

Netflix has a $232 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $232 price target. I would place a stop loss at $335, which is the all-time high. The four main reasons for the proposed short entry are bearish Point and Figure chart, high P/E ratio, bearish analyst price targets, and the intensive insider selling activity.

Source: Insiders Are Selling Netflix