Editor’s Note: This article has been updated to reflect TWLO stock’s 6.4% decline in Monday morning’s trading.
Cloud communications firm Twilio (NYSE:TWLO) is slated to report its Q2 earnings after the market closes on July 31. The company has beaten EPS forecasts by a sizeable margin during the past two quarters and Twilio stock was one of the hottest performers of 2018. TWLO more than tripled in value last year, and the company has continued on a tear in 2019 with nearly 69% growth. A small chunk of that came on Friday when TWLO stock gained 1.5% to close at $149.95 as investors try to get a piece of the action before the Q2 earnings report.
In Monday morning trading however, market sentiment seems to have turned on TWLO stock. It’s down 6.4% as of this writing. There have been no major headlines or downgrades that may have caused this turn, so it seems investors are less-than-optimistic about TWLO earnings. However, I believe the bull case is still in tact heading into Wednesday’s announcement.
Twilio’s Q1 Earnings
Some of the excitement that boosted Twilio stock on Friday goes back to Q1. With analysts expecting EPS in the penny a share range, TWLO delivered an adjusted EPS of 5 cents per share. Revenue also beat expectations handily, with the $233.1 million representing nearly 81% year-over-year growth. The company did report a net loss for the quarter, with the $36.5 million in the red being wider than had been expected, but based on the strong revenue and earnings numbers, TWLO stock got a nice bump after the report was filed.
Twilio also issued Q2 guidance that made investors happy. The company is expecting revenue for the quarter of between $262 million and $265 million and adjusted EPS in the 2-3 cent range.
Q2 Earnings Expectations Boost Twilio Stock
On Wednesday evening, Twilio will be reporting those Q2 earnings. If the company delivers revenue in the range it forecast, that will represent yet another healthy increase compared to the previous year.
Last October, Twilio addressed a weak point in its communication services with the acquisition of SendGrid, a successful e-mail API company. The move added strong e-mail integration capabilities to Twilio’s portfolio of chat, messaging and video communications, along with SendGrid’s 84,000 customers. Twilio has been working on selling its existing customers on those e-mail capabilities as well as pitching its core communication products to the SendGrid customers it gained with the acquisition. Expansion of services paid for by its existing customer base combined with a stronger portfolio of services to offer new customers is expected to power those Q2 earnings — and should prove to have significant upside for TWLO stock.
Even at the low end of TWLO’s guidance, $262 million would represent 77% growth over the $147.5 million reported for Q2 2018 — and that performance led to a 16% surge in Twilio stock.
TWLO Continues its Meteoric Rise
Twilio is a company that many people have never heard of, yet it’s one of the hottest performing tech stocks. Founded in 2008, the cloud communication business was quietly working in the background for years, powering the communication portion of apps for companies like Uber (NYSE:UBER). Twilio went public in 2016 with an IPO price of $15 for TWLO stock and got off to a quick start, topping $64 within three months. However, investor euphoria wore off quickly. TWLO dropped below $30 by the end of the year and remained flat until early 2018.
Strong demand for Twilio’s services and rapid expansion of its business — including the October 2018 acquisition of SendGrid — saw investor excitement ramp up. TWLO was trading below $25 last February, but as investors piled on, the stock shot up, topping $86 to close 2018. It’s continued that rise through 2019 as its business continues to show strong growth and Twilio stock has a Strong Buy recommendation from 18 of 21 polled analysts.
All signs point to TWLO continuing that growth trajectory after after its Q2 earnings call on Wednesday evening.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.