MW Broadcom's most active bonds perk up as stock falls after earnings
By Ciara Linnane
As stock sells off, bondholders remain unfazed
Broadcom Inc.'s stock slid 9% Friday, but its two most-active bonds were signaling that bondholders were unfazed by the company's latest earnings report.
Shareholders were left feeling shortchanged after the company's weaker-than-expected revenue guidance for the current quarter offset a mostly positive report. Broadcom $(AVGO)$ beat overall revenue expectations for the quarter, but that was because of infrastructure solutions, while semiconductor revenue underwhelmed.
See more: Broadcom boosts AI revenue outlook, but stock falls after mixed earnings
In a world expecting great things from any company exposed to the artificial intelligence craze, the numbers fell a bit short. The stock was on track for its worst day since 2020.
But spreads on the company's most-active bonds-the 2.45% notes that mature in February of 2031 and the 4.15% notes that mature in April of 2032-tightened on Friday, while spreads of its remaining bonds were unchanged.
"Clearly the bond market isn't worried about the credit," said one market source.
The following chart from data solutions provider BondCliQ Media Solutions shows the move in spreads over the past three weeks, with the green arrow highlighting the tightening in the past few days. The bonds carry a Baa3 rating from Moody's Ratings and a BBB rating from S&P Global Ratings.
Before this week's action, bondholders were mostly being defensive, selling longer-dated bonds and buying intermediate ones.
Broadcom has more than $48 billion of outstanding bonds, the bulk of which matures in 2033.
Broadcom last tapped the corporate bond market in July, when it raised $5 billion to refinance loans taken on to finance its $69 billion acquisition of VMware Inc.
Cantor Fitzgerald analyst C.J. Muse captured the stock market's mood in a Friday note.
We understand the selloff [as] today's market requires perfection for shares to work," he wrote. "That said, we are buyers on weakness."
For more, read: As Broadcom's stock sells off, bulls say you can get this top AI play for cheap
-Ciara Linnane
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September 06, 2024 12:19 ET (16:19 GMT)
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