Cloudflare jumps on earnings; Expedia down; MicroStrategy in focus on Bitcoin rally

By Abigail W. Adams

Portland, Me., Feb. 9 – While the convertibles primary market was dormant throughout the week with no new paper pricing, the secondary space saw an active session on Friday with earnings-related volatility continuing to drive volume in the space.

Equity markets remained strong on Friday with the latest piece of inflationary data doing little to move markets.

The annual Consumer Price Index revisions released early Friday came in largely as expected with inflationary pressures decreasing but not by enough to renew market hope for a March rate cut, sources said.

While the Dow Jones industrial average was Friday’s laggard and closed in negative territory, the S&P 500 index broached a fresh high to close above 5,000.

The Dow closed Friday down 55 points, or 0.14%, the S&P 500 index closed up 0.57%, the Nasdaq Composite index closed up 1.25% and the Russell 2000 index closed up 1.53%.

There was $100 million in reported convertibles trading volume about one hour into the session and $450 million on the tape in the late afternoon.

Cloudflare Inc.’s 0% convertible notes due 2026 dominated the tape with the notes making strong gains on an outright and dollar-neutral basis after strong earnings.

While Expedia Group, Inc.’s 0% convertible senior notes due 2026 (Baa3/BBB) were lower outright in active trade after lackluster earnings and the announced departure of the company’s CEO, they were moving in line on hedge.

MicroStrategy Inc.’s convertible notes gained in heavy volume as stock shot higher alongside Bitcoin, which is testing a key resistance level.

Cloudflare’s earnings

Cloudflare’s 0% convertible notes jumped on an outright and dollar-neutral basis as stock surged after an earnings beat.

The 0% notes jumped 6 points with stock up more than 20%.

The notes were trading just south of 96.5 versus a stock price of $111.61 early in the session, according to a market source.

They came in alongside stock as the session progressed and were changing hands at 95.625 versus a stock price of $109.48 in the late afternoon.

The notes expanded 2 points dollar-neutral, a source said.

There was $37 million in reported volume.

Cloudflare’s stock traded to a low of $105.01 and a high of $116 before closing at $107.92, up 19.50%.

Stock surged after the cyber-security company reported a large earnings beat and issued upbeat guidance.

Cloudflare reported earnings per share of 15 cents versus the 12 cents expected and revenue of $362.47 million versus the $353 million expected.

Forward guidance also came in above estimates.

Expedia down in line

Expedia’s 0% convertible notes due 2026 were lower alongside stock after the travel technology company reported lackluster earnings and announced the departure of the CEO.

However, the notes were moving in line dollar-neutral, a source said.

The 0% notes were down 3 points outright with stock off almost 18%.

They were trading at 92.875 versus a stock price of $129.19 early in the session and closed the day wrapped around 93.

There was $13 million in reported volume.

Expedia’s stock traded to a low of $126.05 and a high of $132.80 before closing at $131.11, a decrease of 17.78%.

Expedia’s earnings were largely in line with expectations with earnings per share of $1.72 versus analyst expectations for earnings per share of $1.69.

Revenue was $2.89 billion versus analyst expectations for revenue of $2.88 billion.

However, the announcement that the company’s CEO would be stepping down in May sparked a sell-off in the name.

MicroStrategy shoots higher

MicroStrategy’s convertible notes made large gains in heavy volume on Friday as stock shot higher alongside Bitcoin, which is testing a key resistance level.

MicroStrategy’s 0% convertible notes due 2027 were up 3 points outright with stock up more than 10% in intraday activity.

The 0% notes were trading at 86.125 versus a stock price of $646.79 in the late afternoon, according to a market source.

There was $13 million in reported volume.

The equity sensitive 0.75% convertible notes due 2025 jumped almost 12 points outright.

They were trading at 169 versus a stock price of $644 in the late afternoon.

There was $12 million in reported volume.

MicroStrategy’s stock traded to a low of $614.12 and a high of $648.90 before closing at $646.32, an increase of 9.95%.

Stock has jumped almost 30% over the past week after the company reported earnings on Tuesday.

Stock continued to rise on Friday as Bitcoin added more than 4% to trade up to an intraday high of $48,152.

Bitcoin was trading at $47,508, an increase of 4.61%, shortly after the close of U.S. equity markets.

All eyes are now on the cryptocurrency to see if it can break through its mid-January high of $49,000, a technical resistance level that, if surpassed, could set the stage for a new all-time high.

MicroStrategy’s convertible notes were outperformers in 2023.

The 0% convertible notes due 2027 and 0.75% convertible notes due 2025 netted total absolute returns of 125% and 232%, respectively, the previous year as the Bitcoin bulls returned.

Mentioned in this article:

Cloudflare Inc. NYSE: NET

Expedia Corp. Nasdaq: EXPE

MicroStrategy Inc. Nasdaq: MSTR

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