Insiders Are Selling Adobe Systems

Oct.16.13 | About: Adobe Systems (ADBE)

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%.

Adobe Systems Incorporated (NASDAQ:ADBE) operates as a diversified software company worldwide.

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Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Mark Garrett CFO Oct 1 15,000 Yes 84,746 shares 15.0%
Shantanu Narayen CEO Oct 1 50,000 Yes 231,672 shares + 638,300 options 5.4%
James Daley Director Sept. 20 25,000 No 15,086 shares 62.4%
Richard Rowley VP Sept. 19 6,056 No 16,981 shares + 12,669 options 17.0%
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There have been 96,056 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 Adobe's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
October 2013 65,000 0
September 2013 96,056 0
August 2013 65,000 0
July 2013 813,939 0
June 2013 450,276 0
May 2013 0 0
April 2013 324,073 0
March 2013 465,962 0
February 2013 0 0
January 2013 284,177 5,000
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There have been 2,564,483 shares sold and there have been 5,000 shares purchased by insiders this year.

Financials

Adobe reported the fiscal 2013 third-quarter, which ended August 30, financial results on September 17 with the following highlights:

Revenue $995.1 million
Net income $83.0 million
Cash $3.2 billion
Debt $1.5 billion
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Outlook

For the fourth quarter of fiscal 2013, Adobe is targeting a revenue range of $1 billion to $1.05 billion.

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Competition

Adobe's competitors include Avid Technology (NASDAQ:AVID) and Microsoft (NASDAQ:MSFT). Here is a table comparing these companies.

Company ADBE AVID MSFT
Market Cap: 25.96B 256.52M 287.30B
Employees: 11,144 1,787 99,000
Qtrly Rev Growth (yoy): -0.08 -0.23 0.10
Revenue: 4.17B 622.45M 77.85B
Gross Margin: 0.86 0.52 0.74
EBITDA: 970.08M 7.43M 30.10B
Operating Margin: 0.16 -0.03 0.34
Net Income: 447.00M -69.93M 21.86B
EPS: 0.88 -1.81 2.58
P/E: 59.28 N/A 13.37
PEG (5 yr expected): 3.34 N/A 1.54
P/S: 6.23 0.41 3.69
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Adobe has the highest P/S ratio among these three companies.

Here is a table of these competitors' insider-trading activities this year.

Company Insider buying / shares Insider selling / shares
MSFT 0 60,339,723
AVID 0 0
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Only Adobe has seen intensive insider selling during the past 30 days.

Conclusion

There have been four different insiders selling Adobe and there have not been any insiders buying Adobe during the past 30 days. Three of these four insiders decreased their holdings by more than 10%. Adobe has an insider ownership of 0.38%.

Adobe is trading at a P/E ratio of 59.28 and a forward P/E ratio of 33.23. The company has a book value of $13.56 per share.

Before entering short Adobe, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are 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.