Twilio Inc (TWLO) Stock Craters 30% on Terrible, No-Good Guidance

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TWLO stock - Twilio Inc (TWLO) Stock Craters 30% on Terrible, No-Good Guidance

Twilio Inc (NYSE:TWLO) has been rallying lately in expectation of a strong quarterly report. But this time around, the Street got things very wrong.

Twilio Inc (TWLO) Stock Craters 30% on Terrible, No-Good Guidance

In after-hours trading, TWLO stock is off a grueling 30% to $23.93. That’s just above the 52-week low of $23.66 and well under the high of $70.96. Yes, playing the initial public offering game can be extremely volatile.

Now, the first quarter was not bad. The company posted earnings per share that beat the Street by 2 cents a share and revenues came to $87.4 million, compared to the consensus estimated of $83.60.

Instead, the reason for the plunge in TWLO stock is the guidance. For the current quarter, the company forecasts a loss of 10 cents to 11 cents and revenues ranging from $85.5 million to $87.5 million. The Street estimate, on the other hand, was for an 8 cent loss and revenues of $87.8 million.

The full-year outlook was also a bit light. TWLO is expecting a loss of 27 cents to 30 cents on revenues of $356 million to $362 million for the year. Yet the consensus was for a loss of 16 cents on revenues of $370 million.

Granted, such divergences may seem kind of minor. But then again, TWLO stock sported a frothy price-to-sale ratio of 11X ahead of the earnings. So even a slight change can make a big difference in the valuation for TWLO.

OK, so here are some of the other highlights of the quarter:

  • The number of active customer accounts hit 40,696, up from 28,648 on a year-over-year basis.
  • TWLO announced the extension of a strategic relationship with Amazon.com, Inc.’s (NASDAQ:AMZN) cloud services.
  • The company released Programmable chat, which allows for real-time chat for the web, mobile and desktop.
  • There was also the introduction of Programmable Fax.
  • TWLO has launched the beta for Notify, which allows for managing notifications in apps like Facebook Inc’s (NASDAQ:FB) Messenger.


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If Tuesday’s post-market losses stand, TWLO stock will be in deep technical danger.

The company should open around the $24 mark, smashing well below its 50-day moving average around $30.50, putting it near all-time lows at $23.66.

Now I’ve been bearish on TWLO stock for some time. One reason is the intense competitive environment. Some of the rivals include Cisco Systems, Inc. (NASDAQ:CSCO), Vonage Holdings Corp. (NYSE:VG), CallFire, Nexmo and Bandwidth.com.Yet, Amazon may be the most lethal threat.

After all, the company has been building its own communications platform, with a focus on call center operations. While it was primarily for AMZN’s own ecommerce business, the company now thinks it could be leveraged into a separate offering, called Connect.

In light of this, Global Equities Research analyst Trip Chowdhry recently noted: “Pretty much TWLO is toast.”

But there is another nagging issue with TWLO stock — that is, the customer concentration. Note that last year about 30% of revenues came from 10 customers. Of these, FB’s WhatsAPP accounted for 9% and Uber represented over 10%.

Well, in the press release for Q1, Twilio CEO Jeff Lawson had this to say:

“While we are seeing some changes in the relationship with our largest customer, our momentum across the business continues to be strong, with a 42% year over year growth in Active Customer Accounts and a 62% year over year growth in Base Revenue during the quarter.”

Perhaps he is referring to Uber? If so, this should not be too much of a surprise. There’s no secret that Uber is an aggressive negotiator.

And, with the company trying to get to profitability as well as make itself a more attractive IPO candidate, there is probably more pressure to get better terms from vendors — especially when there are a myriad of alternatives on the market.

Tom Taulli runs the InvestorPlace blog IPO Playbook as well as OptionExercise.com, which provides interactive tools & services for employee stock options of pre/post IPO companies. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/twilio-inc-twlo-stock-craters-30-on-terrible-no-good-guidance/.

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