Morning Commentary: Illumina in focus post-earnings; SolarCity continues to improve

By Abigail W. Adams

Portland, Me., April 26 – The convertibles secondary space was off to a slow start on Friday with $70 million on the tape a little more than one hour into the session, according to a market source.

Illumina Inc.’s convertible notes were in focus as stock dropped post-earnings.

The 0% convertible notes due June 15, 2019 traded down alongside stock in high-volume activity. The 0% notes were changing hands at 122.25 with about $12.5 million of the bonds on the tape.

The soon-to-mature notes continued to trade around parity, a market source said.

Illumina’s 0.5% convertible notes due 2021 were also active. The notes were changing hands around 136.875 with a little over $4 million on the tape.

Illumina stock was $311.10, a decrease of 2.59%, shortly before 11 a.m. ET.

Illumina’s convertible notes have been active throughout the week in the run up to the earnings report with holders switching from the shorter duration to the longer duration tranches.

The 0.5% convertible notes were also active on Thursday with the notes contracting about 0.25 point dollar-neutral, a market source said.

While Illumina’s earnings beat on both the top and bottom line, stock was trading down due to a reported slowdown in growth.

Illumina reported earnings per share of $1.60 versus analyst expectations of earnings per share of $1.36. Revenue was $846 million versus analyst expectations of revenue of $835.5 million.

While revenue was better than expected, the first quarter reflected a marked slowdown in growth with sales in certain segments slipping, the Motley Fool reported.

Meanwhile, SolarCity Corp.’s 1.625% convertible notes due Nov. 1, 2019 continued to improve – a reflection of investor confidence Tesla Inc. would be able to cover the notes’ upcoming maturity, sources said.

The 1.625% notes were up another 0.25 point outright to trade at 97.25 with the yield to maturity now 7.29%.

The notes were trading in the 94 range a few months ago, a market source said.

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