Insiders Are Selling Lam Research

Oct.26.13 | About: Lam Research (LRCX)

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%.

Lam Research Corporation (NASDAQ:LRCX) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits.

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Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Sarah O'Dowd SVP Oct 21 6,000 Yes 40,821 shares 12.8%
Stephen Newberry Director Sep 25-Oct 18 50,000 Yes 101,182 shares + 48,700 options 25.0%
Douglas Bettinger CFO Oct 14 7,372 Yes 42,801 shares 14.7%
Christine Heckart Director Oct 14 109 Yes 12,086 shares 0.9%
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There have been 63,481 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 Lam Research's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
October 2013 38,481 0
September 2013 61,109 0
August 2013 5,519 0
July 2013 190,545 0
June 2013 109 0
May 2013 18,109 0
April 2013 75,845 0
March 2013 0 0
February 2013 12,030 0
January 2013 12,450 0
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There have been 414,197 shares sold and there have been zero shares purchased by insiders this year.

Financials

Lam Research reported the fiscal 2014 first-quarter, which ended September 29, financial results on October 23 with the following highlights:

Revenue $1.0 billion
Net income $85.5 million
Cash $2.5 billion
Debt $1.0 billion
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Outlook

For the December 2013 quarter, Lam provided the following guidance on a non-GAAP basis:

  • Shipments of approximately $1.125 billion plus or minus $30 million.
  • Revenue of approximately $1.1 billion plus or minus $30 million.
  • Gross margin of approximately 46.0% plus or minus 1.0%.
  • Operating margin as a percent of revenue of approximately 18.5% plus or minus 1.0%.
  • Earnings per share of approximately $1.02 plus or minus $0.05, assuming a diluted share count of 174 million.

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Competition

Lam Research's competitors include Applied Materials (NASDAQ:AMAT). Here is a table comparing these two companies.

Company LRCX AMAT
Market Cap: 8.94B 21.30B
Employees: 6,600 14,526
Qtrly Rev Growth (yoy): 0.33 -0.16
Revenue: 3.60B 7.17B
Gross Margin: 0.41 0.39
EBITDA: 501.00M 1.08B
Operating Margin: 0.05 0.09
Net Income: 113.88M -442.00M
EPS: 0.66 -0.37
P/E: 82.98 N/A
PEG (5 yr expected): 0.39 3.28
P/S: 2.40 2.99
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Lam Research is trading at a lower P/S ratio than its direct competitor. In Applied Materials, there have been 1,963,113 shares sold and there have been zero shares purchased by insiders this year. Only Lam Research has seen intensive insider selling during the past 30 days.

Conclusion

There have been four different insiders selling Lam Research and there have not been any insiders buying Lam Research during the past 30 days. Three of these four insiders decreased their holdings by more than 10%. Lam Research has an insider ownership of 0.30%.

Lam Research is trading at a P/E ratio of 82.98 and a forward P/E ratio of 12.23. The company has a book value of $27.62 per share. Before entering short Lam Research, I would like to get a bearish confirmation from the Point and Figure chart. The main reason for the proposed short entry is 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.