Yahoo Finance Why Did Akamai Technologies Inc’s (NASDAQ:AKAM) Insiders Sell Their Own Shares?
Akamai Technologies, Inc. provides cloud services for delivering, optimizing, and securing content and business applications over the Internet in the United States and internationally. Akamai Technologies is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 6.02k shares during this period. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. However, it may not be sufficient to base your investment decision merely on these signals. I will be analysing whether these selling activities are supported by favourable future outlook and recent share price volatility.
Check out our latest analysis for Akamai Technologies
Who Are The Insiders?
There were more Akamai Technologies insiders that have sold shares than those that have bought. In total, individual insiders own over 5.01 million shares in the business, which makes up around 2.95% of total shares outstanding. The insider that recently sold more shares is Naomi Seligman (board member) .
Is Future Growth Outlook As Bearish?
Analysts’ expectations for earnings over the next 3 years of 217.38% provides a fantastic outlook for the business. However, this is inconsistent with the signal company insiders are sending with their net selling activity. Delving deeper into the line items, analysts anticipate a limited level of revenue growth next year, although a significantly greater rate of earnings growth. Generally, this difference can be explained by a large drop in cost growth. This may not be seen as a maintainable practice by insiders, who may expect a deterioration in earnings to reflect lower revenues growth in the future. Or they may merely view the stock as overvalued by the market which provides a suitable time to sell.
Did Stock Price Volatility Instigate Selling?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. Akamai Technologies’s shares ranged between $82.58 and $71.39 over the past three months. This indicates moderate volatility with a share price movement of 15.67%. Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal needs.
Next Steps:
Akamai Technologies’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, though the positive growth in expected earnings tells us a different story, and the relatively stable stock price may not warrant exploiting any mispricing. But we must also be aware that insiders divesting may not actually be based their views on the company’s outlook. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two relevant aspects you should further examine:
Financial Health: Does Akamai Technologies have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Akamai Technologies? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
