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All Contents © 2019The Kiplinger Washington Editors
By Harriet Lefton, Contributing Writer
| February 26, 2019
Insider transactions can provide a valuable glimpse into how corporate insiders really view a company. As the famous saying goes: Actions speak louder than words. And the advantage here is that insiders such as executives and directors may well have a greater insight into the company and its outlook than the average investor.
That’s why tracking insider transactions – whether it’s insider buying or insider selling – can be a valuable strategy. Especially when there are multiple insiders either selling or buying stocks around the same time.
Today, we’re looking at the TipRanks Daily Insider Transactions tool to highlight some of the stocks that have insiders heading for the door. This could be because they believe shares are trading at an attractive price and want to take profits – potentially before prices fall.
Crucially, the insider tool we used here allows you to focus on only informative transactions – and therefore excludes uninformative transactions that do not necessarily indicate insider sentiment. For instance, some insiders simply exercise stock options ahead of expiry dates, which doesn’t tell us much.
With that in mind, here are five stocks seeing notable insider selling right now.
Data is as of Feb. 25.
Market value: $5.1 billion
TipRanks consensus price target: $27.00 (15% upside potential)
TipRanks consensus rating: Strong Buy
Array BioPharma (ARRY, $23.49) is a biotechnology company focused on discovering and developing targeted small-molecule drugs to treat cancer.
ARRY shares have popped 65% year-to-date. That’s in part thanks to strong Phase 3 Beacon CRC results for its Braftovi+Mektovi+Erbitux combination treatment for BRAF-mutant colorectal cancer. That’s also thanks to strong sales for its lead asset, Braftovi+Mektovi. In its fiscal second quarter, Array’s combo for BRAF+ melanoma brought in $22.7 million in revenues, topping expectations by $7 million.
Taking advantage of these all-time-high prices are company director Kyle Lefkoff and COO Andrew Robbins. On Feb. 6, Robbins sold $4.79 million of ARRY stock, leaving Robbins with a significantly reduced holding of $1.3 million. Lefkoff, meanwhile, sold just more than $720,000 worth of stock spread across two recent transactions.
Even so, analysts are staying firmly on Array’s side. Out of eight analysts covering the stock, only Goldman Sachs’ Paul Choi holds a more cautious “Hold” rating on ARRY – the rest are all buys.
“Early launch ramp indicates strong market traction so far,” cheers Cantor Fitzgerald’s Varun Kumar. “We believe that the stock currently trades at a significant discount as its lead asset, Braftovi+Mektovi, still appears underappreciated by investors.”
Kumar believes that Array’s combo treatment has a best-in-class profile and is well-positioned commercially in melanoma and clinically in colorectal cancer. His $30 price target implies 28% upside potential. For more information on Array Biopharma’s shares, get a free ARRY Research Report from TipRanks.
Courtesy Turtle Beach
Market value: $226.7 million
TipRanks consensus price target: $29.50 (82% upside potential)
Audio tech company Turtle Beach (HEAR, $16.20) was one of the biggest winners of 2018. Shares exploded by a whopping 688%, mostly in the first half of the year. That’s thanks to its industry leading, award-winning gaming headset, which are enjoying a surge in sales thanks to popular online multiplayer games such as Fortnite.
The company’s performance has slowed in 2019, with shares up about 11%. And recently, owner SG VTB Holdings has been sprinting for the door. Over the past three months, this insider has sold a whopping $16.5 million of HEAR stock. The most recent transaction, on Feb. 14, came to $5.4 million. That’s on top of an $11.3 million sale made by the company five months ago.
But Wall Street was bullish on HEAR months ago, and it remains so now.
“Turtle Beach has multiple long-term tailwinds for its market-leading headset business: expansion of online multiplayer games, video game streaming, and e-sports,” writes Oppenheimer’s Andrew Uerkwitz.
He believes the recent recent surge in sales allows the company to significantly improve its balance sheet and invest in new products to complement core business growth. Find out more from TipRanks in its HEAR Research Report.
Market value: $78.2 billion
TipRanks consensus price target: $390.18 (12% upside potential)
Telecom and mass media company Charter Communications (CHTR, $348.90) recently reported strong revenue growth across the board. As a result, shares have spiked more than 21% year-to-date, well ahead of the broader market.
“We performed well in 2018, growing our internet customer base by 1.3 million, cable revenue by 4.7%, and cable adjusted EBITDA by 6.5% – very strong operating and financial performance, particularly in the midst of what we believe is the largest cable integration ever,” CEO Tom Rutledge said in a statement.
He is referring to the integration among Charter, Time Warner Cable and Bright House, which is now almost complete. This means the company will soon reap the rewards from the heavy investment required to successfully integrate these major companies.
Nonetheless, some insiders have decided to reduce their exposure now. Corporate insiders have sold shares worth $21.3 million over the past three months. This includes four separate sales so far this month, each for between $3 million to $6 million.
Indeed, on Feb. 7, President & COO John Bickman made a substantial $4.7 million sale. Meanwhile, chief marketing officer Jonathan Hargis has retained shares worth only $332,000, after selling off around $20 million throughout the last year.
Analysts display a more bullish sentiment on this stock’s prospects. The stock has a “Strong Buy” consensus and 13% upside potential ahead. But five-star Oppenheimer analyst Timothy Horan is staying on the sidelines, as he has done since initiating coverage back in 2017.
Even though free-cash-flow generation is ramping up, “Competition in video is intense, and CHTR will see a gradual ramp in pressures from (over-the-top) and wireless competitors, but more so in 2020 than this year,” explains the five-star analyst. You can check out more analysis in TipRanks’ CHTR Research Report.
Market value: $1.9 billion
TipRanks consensus price target: $108.00 (2% downside potential)
Software giant SPS Commerce (SPSC, $109.73) provides supply-chain management software technology solutions to retailers and other enterprises. Following solid Q4 results and better-than-expected guidance, shares have surged more than 30% year-to-date.
Perhaps it is these gains that has prompted the company’s CEO and director Archie Black to cut back. On Feb. 14 and 15 he sold shares worth $854,321 – his only SPSC trades during the past six months. And on Feb. 19, director Sven Wehrwein sold off $290,540 of shares; just under a third of his total holding.
Indeed, the average analyst price target suggests shares could drop back rather than gain in the coming months. That’s despite the bullish overall analyst consensus of ‘Strong Buy.’
The high price isn’t deterring Oppenheimer’s Koji Ikeda. He has just reiterated his buy rating with a $112 price target (2% upside potential). “We think SPS Commerce is visionary with technology leadership in fulfillment automation, led by a respected management team,” Ikeda writes.
But he also adds, “On balance, growth in the analytics business is expected to remain soft in 2019, putting a higher emphasis on fulfillment to drive the growth necessary to achieve the revenue targets.” You can check out other analyst targets in TipRanks’ SPSC Research Report.
Market value: $2.2 billion
TipRanks consensus price target: $45.45 (3% downside potential)
TipRanks consensus rating: Moderate Buy
Security stock Rapid7 (RPD, $46.63) aims to reduce risk across the whole enterprise with its cloud-based Insight platform. And as the company has expanded, its share price has soared. RPD shares have more than tripled over the past three years, and they are up more than 30% since we pointed out its “Strong Buy” standing among Wall Street analysts.
The most recent rally comes on the back of another strong quarterly financial performance. Rapid7 overachieved on revenues, annual recurring revenues and operating margins.
“Over the past few years, RPD has evolved from an on-prem, perpetual license driven software company to a subscription, cloud-based platform vendor with four strategic offerings,” writes Rosenblatt’s Marshall Senk.
He continues, “The company remains committed to achieving positive EPS for 2019 and we believe with the strong ARR growth we saw in Q4 (53% vs. our 45%) that goal is attainable.”
As a result, the analyst ramped up his price target to a Street-high $51 – less than 10% upside potential from current levels. In fact, RPD has surpassed its consensus price target from our October look, and many analysts just aren’t adjusting their targets.
Insider activity might also reflect the idea that the stock may be nearing full value. Owner Technology Crossover Ventures VII, L.P. sold off a total of $4 million of Rapid7 stock on Feb. 14 and 15. These are the only two informative insider transactions for RPD that occurred over the past three months. For further stock insights, turn to TipRanks’ RPD Research Report.
Harriet Lefton is head of content at TipRanks, a comprehensive investing tool that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.