Cloud communications app maker Twilio Inc (NYSE:TWLO) had a lavish IPO honeymoon with Wall Street. TWLO stock went public at $15 per share. The stock jumped 90% in its first day on Wall Street. The rally continued all the way to $70 over the next several months.

But since that honeymoon ended, TWLO stock can’t seem to catch a break.

The company has done nothing but meet or beat analyst estimates for the past several quarters. And yet, TWLO stock has dropped all the way from $70 to just over $25 in a year.

Usually, when a stock keeps smashing expectations but keeps heading lower, its a sign of a maxed out valuation gradually unwinding.

That is exactly what we have with TWLO stock. Fundamental concerns over the longevity of the company’s growth narrative continue to challenge TWLO’s overstretched valuation. Meanwhile, slowing growth rates imply that the best of this growth narrative is already in the rear-view mirror.

Time to buy? Not yet. With a $2.4 billion market cap, TWLO stock is still overvalued. All things considered, I think TWLO is worth somewhere around $2.1 billion today.

Here’s how I get there.

TWLO Is In Right Place At The Right Time

There is no doubt about it: Twilio is in the right place at the right time.

Twilio is a cloud communications app maker, and that puts the company in the cloud computing space. That is the right space to be in, because everything is going to the cloud. That includes data storage, commerce and analytics.

It also includes communication, and that is where TWLO is king. The company provides solutions for hot, up-and-coming startups like Uber, Lyft, Airbnb and Shopify Inc (US) (NYSE:SHOP).

They also provide solutions for the more mature companies like Facebook Inc (NASDAQ:FB), Nordstrom, Inc.(NYSE:JWN), Amazon.com, Inc. (NASDAQ:AMZN), Salesforce.com, Inc. (NYSE:CRM) and Paypal Holdings Inc (NASDAQ:PYPL).

As those companies grow their digital and cloud footprints, TWLO will naturally benefit.

TWLO Has Uber Problems

But growth is not guaranteed for TWLO.

The company is a provider of software services to large enterprises. The problem with doing this is that large tech enterprises can easily build that software themselves.

That is exactly what at least one of the tech giants is already doing. Uber, Twilio’s biggest customer at over 10% of revenue, is starting to break away from Twilio and “in-source” its cloud communications services.

Just like that, a big chunk of TWLO revenue is gone. What is to stop other big tech companies like Facebook, Amazon, and Salesforce from also pulling the plug on TWLO?

Doing so is a costly process that requires tremendous effort, scale and technology, but Uber is showing that it’s definitely doable.

Loss of revenue from those big players could be catastrophic for TWLO, who is already suffering from a slowing growth problem (customer growth has fallen from 44% last year to 35% last quarter while base revenue growth has fallen from 79% last year to 43% last quarter).

TWLO Is Worth $2.1 Billion

It is nearly impossible to predict whether or not other big tech players follow Uber and jump ship.

But even ignoring that risk, TWLO isn’t worth $2.4 billion.

Growth is slowing at an alarming rate. Base revenue growth has come down in each quarter this year. Its expected to keep falling.

With revenue growth expected at just 40% this year and 30% next year, my best guess for an annualized revenue growth rate over the next five years is 25% (fiscal 2017 to fiscal 2022). That would imply fiscal 2022 revenues at $1.18 billion.

Margins are expanding, and 20% revenue growth should help with that expansion. I wouldn’t be surprised to see operating margins jump to 10% in 5 years. That would imply fiscal 2022 operating profits of $118 million.

Slap a 35% tax rate on that, and you get to net profits in 2022 of about $77 million. At that point in time, earnings growth will look something like 20% (10-15% revenue growth plus margin expansion).

That sort of growth easily deserves a 40x multiple (double growth). A 40x multiple on $77 million implies a market cap in 2022 of about $3.08 billion.

Discount that back by 10% per year, and you get a 2018 fair value of about $2.1 billion. That is notably lower than the current market cap.

Bottom Line on TWLO Stock

I don’t think TWLO stock is a “Unicorn IPO” like GoPro Inc (NYSE:GPRO), Fitbit Inc (NYSE:FIT), or Shake Shack Inc (NYSE:SHAK).

Its more like Snap Inc (NYSE:SNAP) – a company with solid long-term growth prospects that continues to be over-hyped by the market. There is a price to buy TWLO stock. But that price is not $25.

As of this writing, Luke Lango was long FB, SHOP, and AMZN.