Insider selling is often a sign of bad things for share prices but not always a bad sign for investors. In most cases, insider selling is a well-telegraphed event restricted by regulations and seldom allows a legal escape from impending share-price doom. Because insiders are privy to share-based compensation, most insider sales are related to it. In this scenario, insiders can sell all they want as long as the market keeps buying, and it is buying Coinbase, Procore Technologies, and RXSight, Inc.
Coinbase Global is the most sold stock by insiders
Coinbase Global (NASDAQ: COIN) ranks #1 as the most-sold stock by insiders for the past three months. Ten insiders made 31 trades, raising about $60 million in proceeds. A wide range made the sales, including directors and C-suite execs of all stripes. The upshot is that insiders are still heavily invested and hold more than 33% of the shares, but there is a potential risk. One insider, co-founder F.E. Ehrsam III, is liquidating his position. He made several sales, including four since January 1, bringing his holding from 500,000 shares to only 6,000.
That risk is compounded by the institutions selling the last two quarters. Institutional holding is moderate at 45% and primarily funds. BlackRock and ARKK Investment are the largest holders. ARKK is a known seller that shed more than 20% of its holdings late in Q4 2023.
However, analysts' sentiment mitigates some of the risks. The twenty-two analysts tracked by Insidertrades.com peg the stock at a firm Hold and have been raising their price targets. Even with the recent price correction, the consensus continues to lag the price action, but it is rising strongly and being led higher by revisions. The consensus is up 60% compared to last year and 15% in the last month, with most 2024 revisions ranging from $150 to $180 or 30% to 50% above the current action.
Insiders sell into the Procore rally
Procore Technologies (NYSE: PCOR) is a cloud-based and now AI-assisted platform that allows contractors, engineers and consumers to collaborate on projects. The company is highly valued at 355X its earnings, and growth is slowing but expected to sustain above 20% this year and next. More importantly, profitability was recently achieved and is expected to improve significantly in 2024, with EPS more than doubling.
Nine Procore insiders made sales in the last three months, 26 in total. Sellers include several directors, the CEO, CFO and legal counsel, leaving them with about 40% of the stock. Venture capital firm Iconiq Strategic Partners is in the mix as well, but the sale was small, and its holdings are still robust, representing nearly 25% of the company.
Analysts are buying into the Procore story. The fourteen tracked by Insidertrades.com rate it a Moderate Buy and are leading the consensus target higher. The consensus implies a 6% upside, but the six revisions so far in 2024 all have targets above that level. D.A. Davidson set the $85 high target on February 5th; it implies a 20% upside.
RXSight, Inc. Insiders taking profits off the table
RXSight, Inc. (NASDAQ: RXST) is an interesting play on healthcare, making devices for ophthalmic surgery, replacement lenses to be precise. Its replacement lenses are targeted for the cataract market and programable after surgery using UV light. Insiders, including several directors, the CEO, CCO, COO, and CFO, made twenty-three sales over the last 90 days and why not? The stock is up 300% since the IPO, offering a tidy sum for investors and insiders. The uptrend will likely continue because the growth outlook is so strong and likely cautious.
Analysts rate the stock a solid Buy. Insidertrades.com tracks 6 with ratings, and they are raising their price targets in 2024. The bad news is that the consensus suggests the stock is 20% overvalued but lags the market. The two targets issued in 2024 are $41 and $54, suggesting the market is fairly priced at its current level. The next catalyst is the Q4 earnings report, due in early March. Analysts forecast revenue of $27.73 million for a gain of 72%. That’s down from the previous quarter and year but still solid.
