Morning Commentary: Nutanix, Palo Alto convertibles active post-earnings; Intel lower

By Abigail W. Adams

Portland, Me., Nov. 26 – The convertible secondary space was active early in Tuesday’s session with more than $123 million in reported volume about one hour after the opening bell.

While equity markets were largely flat at Tuesday’s open, some convertible issuers saw major stock swings post-earnings, which drove trading activity in the notes.

Palo Alto Networks Inc.’s 0.75% convertible notes due 2023 sank outright while Nutanix Inc.’s 0% convertible notes due 2023 gained following their earnings reports.

However, Intel Corp.’s 3.25% convertible notes due 2039 were the focus of trading activity on Tuesday after the company announced it would redeem the remaining outstanding amount.

The 3.25% notes were contracting on the news.

Palo Alto down

Palo Alto’s 0.75% convertible notes due 2023 were active early in Tuesday’s session with the notes dropping outright as stock sank following their earnings report.

The notes dropped more than 7 points outright to 109 as stock sank more than 10%.

Palo Alto stock traded down to $222.70, a decrease of 11.02%, shortly before 11 a.m. ET.

While Palo Alto beat expectations on both the top and bottom lines in its first-quarter earnings report, guidance fell short of estimates due to another announced acquisition.

Palo Alto reported earnings per share of $1.05 versus analyst expectations for earnings of $1.03.

Revenue was $771.9 million versus analyst expectations for revenue of $768 million.

While Palo Alto reported an earnings beat, stock was selling off on weak forward guidance due to another acquisition announced concurrently with its earnings report.

The software security company announced that it was acquiring Aporeto Inc., a machine identity technology, to help its cloud-based cyber security efforts.

The $150 million transaction is expected to close in the second-quarter, according to a company news release.

The acquisition weighed on Palo Alto’s forward guidance with the company predicting earnings of $1.11 to $1.13 per share for the second-quarter versus analyst expectations for earnings of $1.30.

Nutanix above par

Nutanix’s 0% convertible notes due 2023 jumped above par for the first time since May following a better-than-expected earnings report.

The notes traded just shy of 103 shortly after the opening bell but came in as the session progressed.

They were changing hands just shy of 101 a little over one hour into the session.

Nutanix stock traded as high as $35.00 early in the session and was changing hands at $33.54, an increase of 16.66%, shortly before 11 a.m. ET.

Nutanix reported a loss per share of 71 cents in its first-quarter earnings report, narrower than analysts’ expectations for a loss per share of 75 cents.

Revenue was $314.8 million versus analysts’ expectations for $306.4 million.

Intel’s call

Intel’s 3.25% convertible notes due 2039 were the most actively traded issue early in Tuesday’s session following the company’s announcement that it would call the remaining amount.

The $2 billion issue has largely been converted out with only $372 million remaining outstanding.

However, holders will lose out on the accrued interest when converting their notes in the redemption, a market source said.

The notes were contracting on the news.

The 3.25% notes were changing hands around 289.625 early in Tuesday’s session with more than $14 million in reported volume.

They were contracted about 0.25 point dollar-neutral, a market source said.

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