Morning Commentary: Earnings onslaught in focus; Wayfair, Western Digital, Etsy trade

By Rebecca Melvin

New York, Oct. 31 – U.S. convertibles players were watching different situations on a big earnings day for the market on Thursday.

Wayfair Inc.’s convertibles were down a lot on an outright basis in active trade after the Boston-based furniture and home furnishings e-commerce company reported a wider-than-expected quarterly loss. It wasn’t yet known how the convertibles did on swap.

For the three months ended Sept. 30, Wayfair said it lost $272 million, which was almost double the year-earlier period, on higher revenue of $2.3 billion.

Adjusted EBITDA was for a loss of $144.2 million, which was below a Reuters’ estimate of analysts for a loss of $139.34 million.

Wayfair’s 0.375% convertibles due 2022 dropped more than 11 points to 105.25 in the early going from 117 prior to the earnings report. The bonds were last trading at about 108.25 bid, 108.75 offered, with the underlying shares trading off 14% at $87.20, according to Trace data.

The Wayfair 1.125% notes due 2024, dropped almost 10 points to the 105 area.

“The W earnings miss is obviously painful for a lot of outright guys,” a New York-based trader said.

But Wayfair wasn’t the only earnings disappointment in the market.

Western Digital Corp. shares were also down 14% in the early going after the hard disk maker and data storage company disappointed on earnings and guidance. Western Digital’s 1.5% convertibles due 2024 were seen down 2 points to 95.625, according to Trace data.

Etsy Inc.’s 0.125% convertibles due 2026 tumbled almost 8 points to the 90.75 area. The Etsy shares were down $7.47, or 14%, to $45.36. The company reported earnings that were in line with expectations and a beat on revenue, but it disappointed on margin guidance, according to news reports.

Also in secondary market action, there was follow-on trading in Exact Sciences Corp.’s convertibles, which remained under pressure. The genomic sciences company reported a third-quarter revenue loss that exceeded estimates on Wednesday.

The Exact Sciences 0.375% convertible notes due 2027 were down to 102 from 106ish on Wednesday and 110ish on Tuesday. Exact Sciences shares were last higher however at $85.21, which was up $1.20, or 1.4%.

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