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In this article, I will feature one online retailer 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%.

Amazon.com (NASDAQ:AMZN) operates as an online retailer in North America and internationally.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Diego PiacentiniSVPNov 156,779Yes187,555 shares3.5%
Jeffrey BlackburnSVPNov 1-1516,041Yes121,488 shares11.7%
Thomas SzkutakCFONov 1-1513,404Yes

101,350 shares

11.7%
David ZapolskyVPNov 152,228Yes13,861 shares13.8%
Jeffrey WilkeSVPNov 1-717,046Yes70,112 shares19.6%
Jeffrey BezosCEONov 1-51,000,000Yes84,970,020 shares1.2%
Tom AlbergDirectorNov 14,103Yes25,908 shares13.7%
Brian ValentineSVPNov 18,309Yes60,524 shares12.1%

There have been 1,067,910 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 Amazon's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
November 20131,067,9100
October 201300
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 2,423,146 shares sold and there have been zero shares purchased by insiders this year. The month of November has seen the most insider selling.

Financials

Amazon reported the third-quarter financial results on October 24 with the following highlights:

Revenue$17.1 billion
Net loss$41 million
Cash$7.7 billion
Debt$3.0 billion

(click to enlarge)

(Source: Earnings presentation)

Outlook

Amazon's fourth quarter guidance is as follows:

  • Net sales are expected to be between $23.5 billion and $26.5 billion, or to grow between 10% and 25% compared with fourth quarter 2012.
  • Operating income (loss) is expected to be between $(500) million and $500 million, compared to $405 million in fourth quarter 2012.

Competition

Amazon's competitors include Apple (NASDAQ:AAPL), and Barnes & Noble (NYSE:BKS). Here is a table comparing these companies.

CompanyAMZNAAPLBKS
Market Cap:168.98B472.35B939.28M
Employees:88,40080,30033,850
Qtrly Rev Growth (yoy):0.240.04-0.09
Revenue:70.13B170.91B6.72B
Gross Margin:0.270.380.24
EBITDA:3.17B55.76B20.43M
Operating Margin:0.010.29-0.03
Net Income:132.00M37.04B-223.48M
EPS:0.2839.75-3.83
P/E:1,337.5713.21N/A
PEG (5 yr expected):14.070.850.08
P/S:2.402.780.14

Amazon has the second-highest P/S ratio among these three companies.

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

CompanyInsider buying / sharesInsider selling / shares
AAPL0240,600
BKS0429,760

Apple has also seen intensive insider selling during the last 30 days.

Conclusion

There have been eight different insiders selling Amazon and there have not been any insiders buying Amazon during the last 30 days. Six of these eight insiders decreased their holdings by more than 10%. Amazon has an insider ownership of 18.70%.

Amazon is trading at a P/E ratio of 1,337.57 and a forward P/E ratio of 138.21. Amazon has a book value of $19.88 per share.

Before entering short Amazon, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are high P/E ratio and the intensive insider selling activity.

Source: Insiders Are Selling Amazon