Lumentum, PROS gain; Microchip tumbles on earnings reports; DISH Network active

By Abigail W. Adams

Portland, Me., Feb. 7 – The convertibles market saw another quiet session on Wednesday as broader equity markets continue to be volatile.

However, quarterly earnings reports are pouring in, pushing long-standing convertible notes to center stage in a convertibles space that has been largely focused on new paper for the past two weeks.

While some convertible notes are seeing gains on an outright basis due to earnings, others are tumbling.

Microchip Technology Inc.’s convertible notes were in focus on Wednesday after the Chandler, Ariz.-based semiconductor company reported third-quarter earnings after the market close Tuesday.

Microchip’s 1.625% notes due 2025 dominated trading activity during Wednesday’s session, tumbling about 13 points on an outright basis as its stock also plummeted.

Microchip’s 1.625% convertible notes due 2027 and 2.25% convertible notes due 2037 saw less action. However, both notes also saw losses on an outright basis.

Lumentum Holdings Inc.’s 0.25% convertible notes due 2024 continued to trade up on an outright basis and saw about a 2-point gain after a 7-point climb on Tuesday.

The Milpitas, Calif.-based optical components maker’s convertible notes and stock have climbed since the company reported its second-quarter earnings and a $200 million delivery of its 3D sensing lasers on Tuesday.

PROS Holdings Inc.’s 2% convertible notes due 2019 also saw about a 6-point gain on an outright basis on Wednesday after reporting its fourth-quarter and year-end earnings reports after the market close on Tuesday.

DISH Network Corp.’s 3.375% convertible notes due 2026 continued to attract attention on Wednesday after an active day on Tuesday. The notes were trading in the 102 to 103 range after spending much of Tuesday wrapped around 101.

Microchip in focus

Microchip’s 1.625% convertible notes due 2025 were in focus during Wednesday’s session, losing about 17 points on an outright basis in active trading. The notes traded to a high of 169 before closing the day just north of 159, according to Trace data.

Microchip’s 1.625% notes due 2027 saw about an 8-point drop, closing Wednesday at 109.41, after trading to a high of 114. The semiconductor company’s 2.25% notes due 2037 dropped about 9 points to end Wednesday at 109.74.

Microchip stock was volatile throughout Wednesday’s session, trading to a high of $89.00 and a low of $82.87 before closing Wednesday at $82.91, a decrease of 9.8%.

Microchip reported a net loss of $251.1 million and loss of $1.07 per diluted share for the third quarter, which was largely due to a one-time tax expense of $439.8 million, according to a company news release.

On a non-GAAP basis, Microchip reported net income of $341.2 million and earnings per share of $1.36 per diluted share.

Fourth-quarter guidance was mixed with earnings per share estimated to be $1.30 to $1.39, versus a consensus estimate of $1.37 per diluted share, and revenue at $964 million to $1 billion, with the consensus estimate at $1.01 billion.

The gainers

Lumentum’s 0.25% convertible notes and stock have been on the rise since the company reported its second-quarter earnings prior to the market open on Tuesday.

The 0.25% notes traded up to 116 early Wednesday before dropping down to close the session at 114, about a 2-point gain from Tuesday when the notes climbed 7 points, according to Trace data.

Lumentum stock closed Wednesday at $53.60, a 3.78% increase, after the stock climbed more than 21% on Tuesday. Lumentum’s second-quarter earnings report beat analyst expectations.

PROS Holdings’ 2% convertible notes due 2019 were also on the rise after beating analyst expectations in its fourth-quarter and year-end financial reports. The 2% convertible notes gained more than 6 points on an outright basis to trade at 111, according to a market source.

PROS Holdings stock reached a new 52-week high on Wednesday, closing the session at $31.45, an increase of 14.86%.

The Houston-based software as a service (SaaS) company reported a non-GAAP net loss per share of 13 cents for the fourth quarter, compared to analyst expectations of a net loss of 18 cents.

DISH active

DISH’s 3.375% convertible notes due 2026 continued to see some trading action on Wednesday after an active day on Tuesday. The notes were trading in the 102 to 103 range after spending much of Tuesday wrapped around 101.

DISH’s 2.375% convertible notes due 2024, in contrast, did not attract nearly the same amount of attention. The 2.375% notes did gain 1 point on an outright basis to trade up to 92 on Wednesday.

The 2.375% notes were in the 90 to 91 range in scattered trading on Tuesday. DISH stock closed Wednesday at $45.1, an increase of 4.11%.

DISH stock was up after a Citigroup upgrade to buy with analyst Jason Bazinet foreseeing a future buyout of the company for $95.00 a share. Citigroup maintained its price target for DISH at $54.00.

DISH had a tumultuous year in 2017 with large revenue and subscription losses. The tumult continues with DISH currently involved in broadcast retransmission licensing disputes with stations in Florida and Arizona.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

Lumentum Holdings Inc. Nasdaq: LITE

Microchip Technology Inc. Nasdaq: MCHP

PROS Holdings Inc. NYSE: PRO

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