Twilio Inc (NYSE:TWLO) — a cloud communications company that allows users to make phone calls and send texts over web service APIs, just reported numbers Monday that show the growth cycle is still at hyper speed. Though TWLO stock is hardly budging in response.
According to Twilio’s second-quarter earnings report — its first as a publicly traded company — revenues shot up by 70% to $64.5 million. That was more than enough to beat the Wall Street consensus of $58.22 million. Meanwhile, a loss of 8 cents per share was far better than expectations for a 15-cent loss on the quarter.
A few other highlights:
- Base revenues were up 84% year-over-year.
- GAAP operational loss of $10.9 million was up from the previous year’s $9.5 million.
- However, non-GAAP operational losses of $5.7 million were cut from $7.4 million in Q2 2015.
- TWLO posted 45% growth in active customer accounts to 30,780.
Sure, TWLO stock didn’t move on the report, but that could be because plenty of good news was already baked in. Twilio shares had already staged a nice run ahead of earnings, up about 8% in the past week alone.
Twilio came public back in late June, with much fanfare. On the first day of trading, TWLO stock soared 92%. That was hardly the end of the gains, with Twilio shares posting nearly 180% in additional returns. So in a year that hasn’t seen much action on the IPO front, Twilio stock has been one of the clear standout offerings.
Investors’ main focus should be on the top line. And the good news there is that growth likely won’t fizzle any time soon.
Twilio has a unique offering that has proven critical for many companies, including Uber and Facebook Inc’s (NASDAQ:FB) WhatsApp. Customers use the service to help provide support.
There are several drivers for the success. First, TWLO was one of the pioneers of mobile development on the platforms from Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL). This gave the company a great head start and also allowed it to build a scalable infrastructure. Also, the technology is easy to implement and free to use; the company only makes money when transactions hit a certain threshold.
The problem: The valuation on TWLO stock looks fairly stretched. Shares currently trade at a nosebleed 18 times sales. By comparison, New Relic Inc (NYSE:NEWR) — another hyper-speed cloud operator — sports a multiple of half that.
Short sellers have glommed on to Twilio stock, too, as 33% of the float is in short positions. In other words, plenty of investors are betting on the bullish trend fizzling out.
Given that a 70% growth rate isn’t enough to give TWLO a significant shove higher, the bears might have the right idea.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He also operates BizDeductor, which provides tax services for the self-employed and gig workers of Uber, Lyft & Airbnb. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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