There are several companies in the market which had an IPO in the past two years, which have never made a profit, which seem unlikely to make a profit any time soon, which are free cash flow negative, and which trade at ridiculous valuations. Today’s joke is Twilio Inc. (NASDAQ:TWLO). TWLO stock went IPO on June 23 of 2016, the stock soared past its IPO price or $15 and ended its first day of trading at $25. It then went as high at $64. Since then, it has come down to $30.63.

TWLO is losing money. Still. In fact, its losses are widening. FY14 net loss was $26.76 million. FY15 net loss was $38.9 million. FY16 loss was $41.3 million. So far this year, through two quarters, TWLO stock has a net loss of $21.32 million.

Free cash flow for TWLO stock has also been negative: $18.4 million in FY14, $20.5 million in FY15, and $24.26 million in FY16. So far this year it is negative $10.9 million.

Every TWLO stock bull will point to revenue growth, and show that it tripled from FY14 to FY16, and has a run-rate increase of 35% this year. Yeah, and I’ll point out that despite that tripling of revenue, R&D and SG&A spend also tripled.

Somehow this loser company is trading at a $2.8 billion valuation. That’s ridiculous. It comes on the heels of the Twilio May earnings report, which announced that Uber defected from using Twilio’s platform, accounting for 12% of revenues. It also lost WhatApp.

Why TWLO Is a Loser

Here’s the thing with Twilio, and it’s something I write about all time: what problem does it solve? At this point, nothing, and that’s because it is now essentially a commodity. The problem is that the fees it charges make it seem like some kind of branded elite product. It isn’t. There are alternatives, and that means TWLO stock will suffer as revenues start to decline in order to compete.

There is another problem for TWLO stock. Uber dumped Twilio because it decided it could do the same thing on its own. Twilio has a big partner in Amazon.com Inc. (NASDAQ:AMZN). You don’t think Amazon is going to do the same thing? Amazon competes on price with everyone.

Now, Twilio did come roaring back in its most recent quarter and showed that the loss of Uber could be scraped back. Yet every bull will show you how every metric continues to improve – except the company continues to lose money. Even with revised guidance – a 4% increase in revenue is not going to change my mind about the ridiculous valuation.

Now, there is some hope for bulls. There were insider purchases. Back in May, the CEO purchased 100,000 shares around $23, and a director picked up 10,000 shares as well. Many of the insiders sold large amounts during the secondary offering at $40 per share last year.

Bottom Line on TWLO

Look, Twilio is a software platform for developers. It allows apps to have communications. Want to call or text your Uber driver? That’s what Twilio did. It still has a million or so developers over Twilio’s customer base of about 40,000 companies.

Yet the issue was, and still is, that this is a commodity and commodities do not do well in the long run. Even though the model seems really great, in that end users can get dinged for a fee with every text or call, the pay-as-you-go model doesn’t change that it is still a commodity.

Nor does it change the fact that it’s a company without profit trading at a crazy valuation.

Lawrence Meyers is the CEO of PDL Capital, and manager of the Liberty Portfolio stock newsletter. As of this writing, he has no position in any stock mentioned. He has 22 years’ experience in the stock market, and has written more than 1,600 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.