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Summary

  • 3 insiders sold Cavium stock within one month.
  • The stock was not purchased by any insiders in the month of intensive selling.
  • All 3 of these insiders decreased their holdings by more than 10%.

Cavium (NASDAQ:CAVM) designs, develops, and markets semiconductor processors for intelligent and secure networks.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Cavium's insider activity during the last 30 days.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Syed AliCEOMay 9150,000Yes1,170,412
shares
11.4%
Vincent PangrazioSVPMay 53,325Yes11,036 shares23.2%
Anil JainVPMay 236,475Yes27,875 shares + 66,400 options27.9%

There have been 189,800 shares sold by insiders during the last 30 days. All these shares were sold pursuant to a Rule 10b5-1 plan. 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 Cavium's insider activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
May 2014189,8000
April 201400
March 201400
February 2014225,3250
January 201400
December 201300
November 20133,5000
October 201300
September 201300
August 201333,0000
July 201300
June 201300
May 20132,7500
April 201300
March 201320,0000
February 201312,6250
January 201300

There have been 487,000 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Cavium reported the first-quarter financial results on April 30 with the following highlights:

Revenue$83.2 million
Net income$2.3 million
Cash$124.1 million
Debt$45.3 million

The three insiders sold their shares after these results.

Outlook

Cavium's second-quarter guidance is as follows:

Revenue$89-$91 million
Non-GAAP EPS$0.32-$0.34

Competition

Cavium's competitors include Broadcom (NASDAQ:BRCM) and Intel (NASDAQ:INTC). Here is a table comparing these companies.

CompanyCAVMBRCMINTC
Market Cap:2.19B17.40B130.92B
Employees:83012,550107,600
Qtrly Rev Growth (yoy):0.200.010.02
Revenue:317.70M8.24B52.89B
Gross Margin:0.630.500.61
EBITDA:36.04M1.29B20.63B
Operating Margin:0.010.110.24
Net Income:2.57M398.00M9.50B
EPS:0.040.681.87
P/E:1,011.7143.6714.07
PEG (5 yr expected):0.931.381.86
P/S:6.892.122.48

Cavium has the highest P/S ratio among these three companies.

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

CompanyInsider buying / sharesInsider selling / shares
BRCM0144,396
INTC0954,352

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

Conclusion

There have been three different insiders selling Cavium, and there have not been any insiders buying Cavium during the last 30 days. All three of these insiders decreased their holdings by more than 10%. Cavium has an insider ownership of 3.10%.

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