Wednesday did not mark a very good day for Twilio Inc (NYSE:TWLO) bulls. Shares plunged 26% despite the company beating on earnings-per-share and revenue expectations for the most recent quarter. Although, TWLO stock is up 2% in early morning trading, that does little to comfort those who took a punch to the gut.
When Twilio came public in summer 2016, it quickly shot higher. After pricing its IPO at $15, it opened for trading at $24 and quickly climbed above $28 in its first day. It didn’t take long for shares to go into “rally mode,” topping out near $70.
What Happened to Twilio?
After reporting a top and bottom line earnings beat, many investors were confused to see TWLO stock down so much. But a look at the guidance and commentary says it all. Twilio’s earnings and revenue guidance for Q2 and the full year came in below Street expectations. That isn’t good.
The other problem? Uber. The ride-hailing app represented 17% of Twilio’s revenue at the end of Q4. In Q1, that share fell to 12% and management expects that figure to continue falling. When the top customer represents almost one-fifth of sales and puts on the brakes, that’s not good.
While this may be unrelated to the stock, it bothered a lot of investors to see management selling stock ahead of the quarter. A slight decline wouldn’t have been an issue. But insider selling ahead of a 25% haircut certainly doesn’t send a good message.
On the positive side, TWLO has a pretty diverse customer base behind Uber and its second-largest customer, WhatsApp. After those two, no one else represents more than 2% of revenue. On another positive note, Twilio added a new chief operating officer. Previously serving 13 years at Salesforce.com, Inc (NYSE:CRM), including four years as its COO, George Hu now joins TWLO.
So What Now With TWLO Stock?
A lot of investors, particularly the hardcore bulls, are calling this latest plunge an amazing buying opportunity. Maybe they are right — or maybe they are just trying to convince themselves that it’s true.