PL - Top Insider Picks For April 2023

2023-05-01 12:40:00 ET

Summary

• The month of April had a couple of very interesting insider purchases.
• In this article, we discuss some of the biggest insider purchases by value.
• In addition, we will take a look into 2 companies more in-depth, which we found particularly interesting this month.

Introduction

April was an exciting month for insider purchases. Multiple interesting companies had some insider action. In this series, we will look at some of the biggest insider purchases over the last month and discuss 2 of the biggest purchases in more detail. Make sure to check out some of the insider purchases of last month .

Top Insider Buys April 2023

Below you can find a list of the most valuable insider purchases for April.

Now let's take a look at the 5 biggest insider purchases of April 2023.

Roger Thurman J, director of Enphase Energy, Inc. ( ENPH ), bought $10.58 million worth of shares. This increased his ownership in the company by over 5%. The stock plummeted after earnings, which Roger Thurman saw as a perfect opportunity to expand his position. This at least shows some confidence.

Enphase Energy Inc. is a global energy management technology company that provides residential and commercial solar plus storage solutions. They manufacture solutions spanning solar generation, energy storage, and web-based monitoring and control, according to their website.

Fate Therapeutics ( FATE ) is a clinical-stage biopharmaceutical company dedicated to bringing a first-in-class pipeline of induced pluripotent stem cell (iPSC)-derived cellular immunotherapies to patients with cancer and autoimmune disorders. The company has some stage 2 Redmile Group, which is a Director and 10% owner of FATE. They bought 276k shares, which increased their position by 2%. Fate is still at the beginning of their journey, which makes it a very risky investment. Currently, the stock has a short interest of over 30%.

Cleveland-Cliffs ( CLF ) is an American mining and natural resources company specializing in producing iron ore and steel. They operate several iron ore mines in Michigan, Minnesota, and Eastern Canada, as well as two steel mills in Indiana and Ohio. The company is the largest producer of iron ore pellets in North America and supplies steel mills with raw materials needed for steel production. CEO and President Lourenco Goncalves bought an additional 100k shares or close to $1.5M worth of shares, which increased his position by 2%

Director Robert W. Stallings of Texas Capital Bancshares, Inc. ( TCBI ) bought $1.975M worth of shares, increasing his stake by close to 18%. Texas Capital Bancshares, Inc. ( TCBI ) is the parent company of Texas Capital Bank, and a member of the Russell 2000® Index and the S&P MidCap 400®. The bank is headquartered in Dallas with full-service locations in the five largest metropolitan areas of Texas: Austin, Dallas, Fort Worth, Houston and San Antonio, according to the company's website .

Kevin Weil, President of Planet Labs ( PL ), just acquired $997k worth of shares, or a 16% increase in ownership. Planet Labs is an American public Earth imaging company based in San Francisco, California. According to the company , its goal is to image the entirety of the Earth daily to monitor changes and pinpoint trends. Planet provides geospatial insights at the speed of change, equipping organizations with the data necessary to make informed, timely decisions. With best-in-class imagery, you can monitor areas of interest, validate information on the ground, and discover trends relevant to your organization.

Enphase Energy (NASDAQ: ENPH )

Enphase Energy specializes in developing and manufacturing advanced energy solutions for the residential and commercial solar markets. In addition, they provide products and services that help their customers generate and manage their solar power.

Enphase Energy's main product is the Enphase Microinverter System, which is designed to improve the performance and reliability of solar photovoltaic (PV) systems. This system includes microinverters, small electronic devices that convert DC power from solar panels into AC power that people can use in their homes and businesses. Their microinverters are installed directly on each solar panel, allowing for greater energy efficiency and flexibility in system design.

In addition to the microinverter system, Enphase Energy also offers a range of monitoring and management tools, such as the Enlighten software platform, which enables customers to track the performance of their solar systems in real-time. This allows users to optimize their energy usage and maximize their savings on electricity bills.

Enphase Energy operates within several continents, such as North and Latin America, Europe, and the Asia Pacific, and in more than 145 countries .

Enphase released its Q1 2023 earnings on April 25 ^th after hours, and the market was not impressed with the release’s content. Before the release, Seeking Alpha News provided an earnings preview highlighting ENPH's impressive record of beating EPS and revenue estimates over the past two years. The Q1 EPS and revenue forecasts were optimistic, with analysts anticipating YoY growth of approximately 54 % and 63%, respectively.

However, Enphase's management guidance for Q2 revenues of $700M-$750M fell short of the USD 760M analyst consensus estimate, leading to a significant drop in the stock price since the stock market typically prices assets based on their future potential rather than actual outcomes.

In addition, Enphase's projected gross margin is 41%-44% for Q2, which aligns with their Q1 results; however, it is not enough to satisfy the market. This consequently constituted a drop in the share price of approximately 25% the following day – Mr. Market was not impressed.

This is not to mention a new energy billing structure in California named NEM 3.0 . It is set to lower the export rates of the excess power consumers generate through their solar panels by almost 75%. This system is generally seen as a reason for new consumers to enter the solar panel market, which seemed to have investors shy away from ENPH.

Looking at their financials, we see a steady and solid growth in their gross margin and revenue, which has grown from $322.59M to $2,330M between 2016 and 2022 in the figure below.

Thus, it becomes apparent that ENPH expects virtually no growth in their margins in the coming quarter alongside a lower revenue. In the table below, we see more of ENPH’s financial measures, where it should be noted that their free cash flow has grown significantly through the years. Their 2022 yearly earnings reported an FCF of almost $700M and more than $832M in TTM. In addition, their 5-year revenue CAGR is 52.59%, and their 5-year operating income CAGR is an impressive 143.50%.

Furthermore, their operating margin generally improved through the years and is currently higher than the most recent low in 2021. Overall, ENPH’s financials show a company that has grown tremendously in the last several years. However, their Q2 guidance indicates that the company may see a slowdown in the impressive growth they have seen in the past.

ENPH Technical Analysis

If we look at the technicals of ENPH’s stock price, it clearly shows how much of a dive the price took after their latest earnings report, as the stock price decreased by almost 25%. The stock fell to the 200-EMA on the weekly chart around the $160 level, where it seemed to find support and ended the week at $164. From here, the stock appears to have a relatively big room to keep moving up, with the first resistance level being the 0.886

Fibonacci number at around $177.8; however, it could quickly move past this. The most exciting thing to look out for is whether the stock can break through out of the channel it is currently in and move towards the next resistance level at $214. If it fails to do so, we see a real possibility that this stock could move even further down toward $120 within the next few months. Currently, the RSI is 37.90, and thus the stock seems to be in oversold territory, and the MACD shows negative momentum. However, on its way to turning negative – a significant fall was seen in the past week is the main reason it remains negative. Based on their director’s insider purchases, it would seem that he believes ENPH will break through and head toward new highs.

Cleveland-Cliffs, Inc. ( CLF )

Cleveland-Cliffs is an American mining and natural resources company specializing in producing iron ore and steel. They operate several iron ore mines in Michigan, Minnesota, and Eastern Canada, as well as two steel mills in Indiana and Ohio. The company is the largest producer of iron ore pellets in North America and supplies steel mills with raw materials needed for steel production.

In addition to its core business, Cleveland-Cliffs has also made several acquisitions over the years to expand its product offerings and market reach. In 2020, the company acquired AK Steel, a leading producer of electrical and stainless-steel products, and ArcelorMittal USA, a major flat-rolled steel producer.

With these acquisitions, Cleveland-Cliffs has become a vertically integrated steel producer, which controls the raw materials and production processes needed for steelmaking. The company has also expanded its offerings to include non-steel products such as hot briquette iron, a high-quality raw material used in electric arc furnaces.

Cleveland-Cliffs is a significant player in the iron and steel industry, with a diverse range of products and a strong presence in North America.

Cleveland-Cliffs has reported that its Q1 2023 EBITDA will be $243M , but the company is confident that Q2 EBITDA will be significantly higher than Q1's figure. This raises the question of whether Q2 EBITDA could approach the $800 million mark. For Cleveland-Cliffs to maintain its $9 billion valuation, it must sustainably achieve at least $4B EBITDA. The company's CEO, Lourenco Goncalves, is seen as a significant asset, having overseen the acquisition of ArcelorMittal USA in 2020, making Cleveland-Cliffs one of the biggest steel suppliers to the automotive industry in North America. This acquisition has proven intelligent and sets Cleveland-Cliffs apart from other steel companies. However, the company faces competition from other steel companies currently trading at cheaper valuations, such as United States Steel ( X ), which we discussed in detail in this article .

Looking at CLF’s financials, specifically in the figure below, it becomes apparent that CLF has taken advantage of the elevated prices of steel and iron we saw during 2020 and 2021 and parts of 2022. This has generated revenue from around $2B in 2016 to almost $23B in 2022 and $22.3B TTM. Their gross margins have suffered, however, as their cost of revenue has skyrocketed alongside their revenues.

Furthermore, as we look at the table below, CLF has seen its FCF decrease at an alarming rate since 2021, which could be cause for concern, as it has halved between 2021 and TTM. This is all the while spending more in CAPEX, while their operating income decreased by 86% in the same period. Their operational cash flow has been holding up relatively well despite the significant decrease in commodity prices seen in parts of 2022 and 2023; however, the hope for CLF is that these commodity prices remain at their current levels or start to increase.

CLF technical analysis

Like many other companies that work with commodities, CLF has felt the pain of falling commodity prices, also reflected in the share price movement. The stock price is currently $15.38, and the next support level is $14.35. There is not much evidence to suggest that this stock will not continue to fall further toward this support level, as the RSI is currently 41.55 and thus not in definite oversold territory, and MACD is showing negative momentum. Therefore, any investor looking to enter a position in CLF should watch this level, as it is still possible to break even further down.

We see two potential outcomes for CLF. First, if the stock manages to bounce off $14.35, then there is room for the stock to rise further towards the 200-EMA, which is currently $16.24, and potentially further towards the trendline of the channel, the price sits presently within. However, if the support does not hold, this stock may be headed toward the $11 handle, in our opinion.

Conclusion

ENPH released its Q1 2023 earnings on April 25th, which included optimistic EPS and revenue forecasts. However, the stock price dropped by approximately 25% due to Enphase's lower-than-expected Q2 revenue guidance and the new energy billing structure in California, NEM 3.0, which is set to lower export rates. Despite this, Enphase's financials show impressive growth over the years, with a steady gross margin and revenue increase. The director's insider purchases suggest that they believe the stock will break through and head toward new highs.

The technicals of ENPH's stock price show it has room to keep moving up, with the first resistance level being the 0.886 Fibonacci number at around $177.8. However, if it fails to break through, it is possible to move even further down toward $120 within the next few months.

Similarly, CLF has been on a downward trend recently, as falling commodity prices have made the company fall out of favor for many investors. The stock is currently close to a significant level of support, and if the insider purchase by Goncalves Lourenco is anything to go by, there could be a belief that the stock will bounce off this level.

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