Insiders Are Selling LinkedIn

Nov. 7.13 | About: LinkedIn (LNKD)

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%.

LinkedIn Corporation (NYSE:LNKD) operates an online professional network.

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Insider selling during the last 30 days

Here is a table of LinkedIn'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
Deep Nishar SVP Oct 7-Nov 5 46,557 Yes 81,990 shares 36.2%
David Henke SVP Oct 7-Nov 5 35,416 Yes 24,063 shares 59.5%
David Sze Director Oct 15-Nov 1 12,500 Yes 185,688 shares 6.3%
Erika Rottenberg VP Oct 9-23 8,000 Yes 63,454 shares + 27,725 options 8.1%
Jeff Weiner CEO Oct 7-Nov 5 111,000 Yes 181,835 shares + 1,212,911 options 7.4%
Reid Hoffman Director Oct 7-Nov 5 250,002 Yes 15,906,561 shares 1.5%
Michael Gamson SVP Oct 15 8,747 Yes 132,789 shares + 145,495 options 3.0%
James Scott SVP Oct 8 6,250 Yes 36,182 shares + 100,000 options 4.4%
Steve Sordello CFO Oct 9 5,000 Yes 58,424 shares + 5,000 options 7.3%
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There have been 483,472 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 LinkedIn's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
November 2013 179,391 0
October 2013 310,331 0
September 2013 316,892 0
August 2013 351,804 0
July 2013 333,705 0
June 2013 361,268 0
May 2013 400,593 0
April 2013 347,706 0
March 2013 398,077 0
February 2013 474,020 0
January 2013 427,625 0
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There have been 3,901,412 shares sold and there have been zero shares purchased by insiders this year.

Financials

LinkedIn reported the third-quarter financial results on October 29 with the following highlights:

Revenue $393.0 million
Net loss $3.4 million
Cash $2.3 billion
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(Source: Earnings presentation)

Outlook

LinkedIn's guidance is as follows:

  Q4/2013 FY/2013
Revenue $415-$420 million ~$1.5 billion
Adjusted EBITDA $98-$100 million ~$364 million
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(Source: Earnings presentation)

Competition

LinkedIn's competitors include Facebook (NASDAQ:FB) and Monster Worldwide (NYSE:MWW). Here is a table comparing these companies.

Company LNKD FB MWW
Market Cap: 26.36B 119.36B 497.35M
Employees: 4,812 4,619 5,000
Qtrly Rev Growth (yoy): 0.56 0.60 -0.11
Revenue: 1.38B 6.87B 844.11M
Gross Margin: 0.87 0.74 0.55
EBITDA: 167.95M 3.16B 133.30M
Operating Margin: 0.05 0.32 0.08
Net Income: 34.49M 1.01B 51.06M
EPS: 0.22 0.39 -2.33
P/E: 994.50 125.63 N/A
PEG (5 yr expected): 2.60 1.96 1.49
P/S: 19.03 17.37 0.59
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LinkedIn 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
FB 0 12,569,626
MWW 0 0
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Only LinkedIn has seen intensive insider selling during the past 30 days.

Conclusion

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

LinkedIn is trading at a P/E ratio of 994.50 and a forward P/E ratio of 99.45. LinkedIn has a book value of $21.22 per share.

LinkedIn has a $176 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $176 price target. I would place a stop loss at $258, which is the all-time high. The four main reasons for the proposed short entry are high P/S ratio, high P/E ratio, bearish Point and Figure chart, and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in LNKD over 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.