Morning Commentary: Palo Alto Networks, Dycom convertibles trend lower in wake of earnings

By Stephanie N. Rotondo

Seattle, Nov. 22 – Liquidity in the convertible bond market remained thin ahead of the Thanksgiving holiday, a trader reported early Tuesday.

However, of the day’s notable names, things were trending lower.

Palo Alto Networks Inc.’s 0% convertible notes due 2019, for instance, were waning in the wake of quarterly results that came late Monday.

A trader said the paper was trading in a 137.75 to 140 context, “on an 80% delta, all day long.”

The stock (NYSE: PANW) was down $22.42, or 13.99%, at $138.62.

The cyber security firm posted results on Monday that showed a gain in revenue, though at the slowest pace since the company went public. The company also warned that revenue growth might remain weaker than usual for the current quarter.

Additionally, the company reported a 55% surge in stock-based compensation, which weighed on the bottom line.

In other earnings news, Dycom Industries Inc. came out with results that beat on a per-share basis but missed revenue estimates.

The company’s 0.75% convertible notes due 2021 tanked in response, following the equity (NYSE: DY) lower.

A trader placed the convertible debt in a 105.75 to 106.125 range, versus a stock price of $75.00.

He noted that the stock was down as much as $18.00 in early trading.

As for the bonds, they had previously traded in a 117 to 118 context.

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