Synchronoss Technologies: 5 Different Insiders Have Sold Shares This Month

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%.

Synchronoss Technologies (NASDAQ:SNCR) provides software-based activation and personal cloud solutions for connected devices.

(click to enlarge)Click to enlarge

Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Lawrence Irving CFO Dec 17-23 26,821 Yes 132,390 shares + 5,634 options 16.3%
Stephen Waldis CEO Dec 19 25,000 Yes 697,322 shares 3.5%
Robert Garcia President Dec 11 9,959 Yes 69,404 shares 12.5%
Paula Hilbert EVP Nov 29-Dec 9 5,613 Yes 25,364 shares + 31,666 options 9.0%
Patrick Doran EVP Dec 6 1,623 Yes 26,554 shares + 1,711 options 5.4%
Click to enlarge

There have been 69,016 shares sold by insiders during the last 30 days.

SEC Rule 10b5-1 is a regulation enacted by the United States Securities and Exchange Commission (SEC) in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an unsettled issue over the definition of insider trading, which is prohibited by SEC Rule 10b-5. After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. This staff interpretation raises the possibility that executives can exploit this safe harbor by entering into 10b5-1 trading plans before they have inside information while retaining the option to later cancel those plans based on inside information.

For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1(c), because he planned the trade before he learned the inside information.

In general, it is a safer way for an insider to sell shares pursuant to a Rule 10b5-1 trading plan than without it.

Insider selling by calendar month

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

Month Insider selling / shares Insider buying / shares
December 2013 68,797 0
November 2013 51,278 0
October 2013 55,760 0
September 2013 56,772 0
August 2013 85,588 0
July 2013 90,214 0
June 2013 89,427 0
May 2013 111,638 0
April 2013 91,377 0
March 2013 116,518 0
February 2013 78,551 0
January 2013 52,857 0
Click to enlarge

There have been 948,777 shares sold and there have been zero shares purchased by insiders this year.

Financials

Synchronoss reported the third-quarter financial results on November 4 with the following highlights:

Revenue $89.7 million
Net income $3.6 million
Cash $50.8 million
Debt $9.3 million
Click to enlarge

Outlook

Synchronoss' guidance is as follows:

  Q4/2013 FY2013
Non-GAAP revenue $94-$97 million $349-$352 million
Non-GAAP EPS $0.38-$0.41 $1.31-$1.34
Click to enlarge

Competition

Synchronoss' competitors include Amdocs Limited (NASDAQ:DOX), CSG Systems International (NASDAQ:CSGS), and NeuStar (NYSE:NSR). Here is a table comparing these companies.

Company SNCR DOX CSGS NSR Industry Average (Application Software)
Market Cap: 1.22B 6.60B 939.57M 3.12B 196.63M
Employees: 1,340 20,774 3,542 1,543 165.00
Qtrly Rev Growth (yoy): 0.30 0.03 -0.02 0.08 0.09
Revenue: 325.02M 3.35B 750.93M 878.57M 56.20M
Gross Margin: 0.58 0.35 0.49 0.77 0.58
EBITDA: 65.60M 622.33M 124.67M 369.03M 7.72M
Operating Margin: 0.10 0.14 0.11 0.34 -0.11
Net Income: 10.93M 412.44M 58.08M 162.48M N/A
EPS: 0.28 2.53 1.79 2.43 N/A
P/E: 111.94 16.30 16.53 20.52 15.88
PEG (5 yr expected): 1.17 1.57 1.24 1.17 1.04
P/S: 3.72 1.97 1.25 3.50 2.78
Click to enlarge
Click to enlarge

Synchronoss has the highest P/S ratio among these four companies.

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

Company Insider buying / shares Insider selling / shares
DOX N/A N/A
CSGS 116,798 96,014
NSR 0 29,017
Click to enlarge

Only Synchronoss has seen intensive insider selling during the last 30 days.

Conclusion

There have been five different insiders selling Synchronoss and there have not been any insiders buying Synchronoss during the last 30 days. Two of these five insiders decreased their holdings by more than 10%. Synchronoss has an insider ownership of 2.40%.

Synchronoss has a $18 price target from the Point and Figure chart. I believe there is an opportunity for a short entry with the $18 price target. I would place a stop loss at $39, which is the 5-year high. The three main reasons for the proposed short entry are bearish Point and Figure chart, relatively high P/S ratio, and the intensive insider-selling activity.

(click to enlarge)Click to enlarge

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