Pioneer Natural Resources convertibles rise; Wayfair, Etsy notes crash post-earnings

By Abigail W. Adams

Portland, Me., May 5 – Thursday marked more carnage for risk assets as equities cratered by historic proportions following the Federal Reserve’s first 50 basis point interest rate increase in two decades.

While equities rallied on Wednesday following news that a 75 bps rate increase was not on the table, investors were beginning to digest the implications of a 50 bps rate increase against a backdrop of weak earnings outlooks, sources said.

The Dow Jones industrial average closed Thursday down 1,063 points, or 3.12%, the S&P 500 index closed down 3.56%, the Nasdaq Composite index closed down 4.99% and the Russell 2000 index closed down 4.04%.

Credit spreads blew out on Thursday with weak credits on the chopping block as the market priced in the rate-increase schedule’s impact on economic growth.

There was $90 million in reported volume about one hour into the session and $545 million on the tape heading into the market close.

While the convertibles secondary space was weak across the board, earnings-related news and topical news continued to drive trading activity.

Pioneer Natural Resources Co.’s deep-in-the-money 0.25% convertible notes due 2025 were in focus with the notes continuing to stand out as a winner following the oil and gas company’s earnings report.

However, the convertible notes of e-commerce companies continued to take a hit with weak earnings continuing to drive negative sentiment.

Etsy Inc.’s and Wayfair Inc.’s convertible notes were weaker as the stock of both e-commerce companies sank double digits following earnings.

Pioneer gains

Pioneer Natural Resources’ 0.25% convertible notes due 2025 remained a winner in a badly battered secondary space on Thursday with the deep-in-the-money convertible notes rising with stock after a large earnings beat.

The 0.25% notes rose about 7 points outright and were changing hands at 243.75 versus a stock price of $258.80 early in the session, according to a market source.

They were trading at 240 in the late afternoon.

There was $32 million in reported volume.

The equity sensitive notes move in line with stock, a source said.

Pioneer Natural Resources’ stock traded to a high of $259.86 and a low of $249.73 before closing the day at $256.35, an increase of 1.41%.

Pioneer’s stock remained in the green despite the carnage in equities after the oil and gas company bested expectations in its first-quarter earnings report.

Pioneer reported earnings per share of $7.74 versus analyst expectations for earnings of $7.36. Revenue was $6.17 billion versus the $5.99 billion expected.

Pioneer’s stock and convertible notes have been on a tear alongside crude oil futures following Russia’s invasion of Ukraine in late February.

Wayfair’s earnings

Wayfair’s convertible notes sank in active trading as stock plunged double digits following earnings.

Wayfair’s struggling 0.625% convertible notes due 2025 fell another 3.75 points outright with stock off 25%.

The notes were changing hands at 72.125 versus a stock price of $67.54 in the late afternoon, according to a market source.

There was $30 million in reported volume.

The 1.125% convertible notes due 2024 sank 13 points outright.

The notes were trading at 92.875 versus a stock price of $67.32 in the late afternoon.

There was $17 million in reported volume.

Wayfair’s stock traded to a high of $79.21 and a low of $65.32 before closing the day at $67.49, a decrease of 25.64%.

Stock cratered after the home decor e-commerce company reported a wider-than-anticipated loss.

Wayfair reported losses per share of $1.96 versus expectations for losses per share of $1.53.

Revenue was in line with expectations at $2.99 billion.

The company reported a significant loss of its consumer base.

Etsy’s earnings

While not as active, Etsy’s convertible notes were also under pressure as the e-commerce company’s stock plunged post-earnings.

The 0.125% convertible notes due 2026 fell 10 points outright with stock off more than 16%.

The notes were changing hands at 128 heading into the market close.

The 0.125% convertible notes due 2027 were down 3 points outright to close Thursday’s session at 84.

The notes contracted 0.5 point to 1 point dollar-neutral.

Etsy’s stock traded to a high of $95.30 and a low of $88.88 before closing the day at $90.93, a decrease of 16.83%.

Etsy beat expectations in the first quarter with earnings per share of 92 cents versus analyst expectations for earnings per share of 76 cents.

Revenue was $579.27 million versus analyst expectations for revenue of $574.71 million.

However, the vintage and hand-crafted e-commerce site’s stock tanked after the company issued weak guidance and warned of slowing growth.

Mentioned in this article:

Etsy Inc. Nasdaq: ETSY

Pioneer Natural Resources Co. NYSE: PXD

Wayfair Inc. NYSE: W

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