A year ago, Twilio Inc (NASDAQ:TWLO) was hailed as one of the market’s most promising stocks, but thus far, TWLO stock has failed to live up to that promise.
After coming out of the gates hot following its explosive June 2016 IPO, TWLO has mostly fallen flat. From a high near $69 last September, the stock has come crashing down to as low as $23 this May.
At $28 as of this writing, it’s tempting to assume that Twilio stock is in the midst of a revival. But the chart tells a different story.
TWLO Stock Chart Looks Ugly
Click to EnlargeBoiled down to its essence, that’s one major drop in the last year — followed by a whole lot of churn.
To be sure, there have been fits and starts for TWLO stock — it started the year strong in January and February before all the air came out of the balloon in March.
It made another strong push in April … only to come crashing down to new 52-week lows in May. And it bounced back nicely in June and July, but it has since stalled yet again.
In the aggregate, all those ups and downs have amounted to nothing, as TWLO is almost exactly flat year-to-date. And if the chart is any guide, this recent pullback from $33 to $28 might not be over yet — certainly not if the stock breaks below $28, which has held firm as support for the last two-plus months.
Yes, there are things to like about Twilio as a company.
Despite its lack of profits, TWLO’s sales growth remains strong at 48% last quarter. Its customer base is expanding at a healthy rate. And its deal with Amazon Web Services, which integrates its own APIs with Amazon’s new cloud-based contact service center Amazon Connect, is just starting to bear fruit.
But aside from a decisive top- and bottom-line earnings beat earlier this month, movement in TWLO stock has been underwhelming. You can chalk it up to normal Wall Street growing pains for a tech stock (see Facebook Inc (NASDAQ:FB) and Netflix, Inc. (NASDAQ:NFLX)) with a business that’s difficult to explain (in a nutshell, it provides a cloud-based platform for complex text-messaging and voice-based communication that comes in handy for companies like Uber).
But bottom-line results are what matter on Wall Street. And the bottom line right now is, aside from a 92% run-up on its first day of trading after coming public at $15, TWLO stock has been a hopeless failure.
Avoid TWLO Below $34
With no profits on the horizon, third- and fourth-quarter sales estimates more modest than the previous two quarters, and a high price-to-sales ratio (7.85), TWLO may hold to its current up-and-down pattern for quite some time.
From a technical standpoint, Twilio’s upside has been capped at $34 all year — since last November in fact. Thus, I wouldn’t buy the stock until it proves it can break through that ceiling. As it stands now, TWLO stock hasn’t broken through any ceiling since the initial fervor surrounding its smashing IPO subsided.
Don’t expect that breakthrough to come anytime soon.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
