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
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
09-06-24 1219ET
Copyright (c) 2024 Dow Jones & Company, Inc.-
What’s the Difference Between the CPI and PCE Indexes?
-
Micron Earnings: Great Guidance but Stock Now Looks Fairly Valued
-
August PCE Report Forecasts Show More Good News on Inflation
-
AI Stocks May Be Down, but Don’t Count Them Out
-
4 Stocks to Buy as the Fed Cuts Interest Rates
-
Markets Brief: The Uncertain Path to Neutral Interest Rates
-
What’s Happening in the Markets This Week
-
Where Top Stock Fund Managers Are Looking Next After the Fed Rate Cut
-
Our Top Pick for Investing in US Renewable Energy
-
Undervalued by 25% and Yielding 5%, This Stock Is a Buy
-
Can AI Predict Future Stock Returns?
-
The Best Energy Stocks to Buy Now
-
10 Undervalued Wide-Moat Stocks
-
Obesity Drugs: Can New Firms Take Market Share From Eli Lilly and Novo Nordisk?
-
New 4-Star Stocks
-
Intel Fair Value Left Unchanged Despite Qualcomm Takeover Talk