Don’t Run! Be Ready to Buy Into Twilio Stock.

When it comes to Twilio (NYSE:TWLO), long gone is the “nothing but blue skies” crowd. And maybe for a good reason or two. Still, when it comes to a smarter TWLO stock investment, the time to act is finally looking like now.

The Twilio (TWLO) logo is displayed over a white background on a smartphone screen.
Source: rafapress / Shutterstock.com

For this article, I’ll look at drivers impacting Twilio in 2021 — and the drivers that are ready to help usher in a solid new year for TWLO stock investors. Then I’ll offer a risk-adjusted determination aligned with those findings.

You’d barely know it judging by the S&P 500, the Dow Jones and other indices sporting positive month-to-date returns just removed from record setting close prices. But outside bellwethers muscled by a select cadre of heavyweights like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Costco (NASDAQ:COST) or Chevron (NYSE:CVX), it has been a punishing few weeks elsewhere.

In particular, growth stocks have been hard hit. From Cloudflare (NYSE:NET) to Rivian (NASDAQ:RIVN), Matterport (NASDAQ:MTTR) and many others, the proof is everywhere. Yet, among the publicly traded collateral damage, a now much leaner TWLO stock has been thrown out with the bathwater.

TWLO Stock at a Glance

Despite the warnings you may hear to avoid this cloud-based, software-as-a-service (SaaS) communications specialist, TWLO stock is saying otherwise. Twilio’s unraveling from its mid-February all-time-high (ATH) and three-year organic sales growth forecast of 30% are both conspiring to make shares a bullish standout going into next year.

Take Twilio’s relatively attractive price-to-sales (P/S) multiple. At roughly 17 times revenues, the ratio is now flirting with levels last seen back in the spring of 2020, as Covid-19 was just beginning to loosen its grip on Wall Street.

Obviously, that’s still steep relative to a straight-up value play. What’s more, it would be unwise to simply dismiss the company’s mounting losses and share dilution as the outfit expands its business. But TWLO stock investors have also gone from “A to B” — or rather, “A to D” — on the backs of those worries.

Additionally, as a market leader in the customer text messaging and video communication space, Twilio’s “spend now and the rest will take care of itself later” playbook has bullish precedent, too. Ever hear of Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) or Tesla (NASDAQ:TSLA)? Of course you have. Their performances and impact are the stuff of legend. But it’s also true that each company aggressively spent its way into control of their respective markets.

To be fair, it would be overly presumptuous to assign a “the next” kind of description to Twilio. And, to be quite honest, Twilio’s interfacing niche doesn’t hold the same cache or game-changing influence of an AMZN, NFLX or TSLA. Sorry.

Still, there’s little doubt that right now TWLO stock offers investors a chance to own an intersection of sorts, where value meets growth on the price chart going into 2022.

Twilio’s Weekly Price Chart

Twilio (TWLO) testing key Fib-based price and pattern support with bullish stochastics signal


Source: Charts by TradingView

Calling a top is hard. But so are bottoms. Today, though, TWLO’s weekly price chart has put together very compelling technical work in which a meaningful intermediate low in shares could occur.

As it stands, Twilio’s year-to-date decline and larger-than-average bear market correction of nearly 50% have put shares into a testing position of a multi-layered support zone.

The well-illustrated weekly chart of TWLO stock shows an area from roughly $215 to $265 as holding retracement, pattern completion and price support worthy of a new bullish cycle to emerge.

For investors that follow Fibonacci, today shares are sandwiched between TWLO’s 50% and 62% retracement levels tied to the stock’s Covid low. What’s more, a pair of two-step patterns — where legs “AB” and “ab” match legs “CD” and “cd” — are in play as well.

The weekly chart also reveals support from Twilio’s down channel is cutting right through the support zone. Plus, a bullish and divergent stochastics indicator bottom is backing up a nearby bottom and end to this year’s bearish cycle.

Given all the evidence, my observation is that, rather than “spend now and the rest will take care of itself later,” bullish investors should wait for a fully formed weekly pivot low to signal.

At the moment and two sessions into the week, TWLO stock could be providing investors with a less-volatile inside candlestick to help with that sort of buy decision.

Should that unfold — or something of similar-looking stripes emerge — spending a bit less on a hedged strategy like the March $290/$340 bull call spread is a smart business move, both off and on the price chart.

On the date of publication, Chris Tyler did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


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