It has been a bumpy day for stocks overall, with a surge, a plunge and then a resurgence higher today. That said, one stock that investors are keying in on in particular is Twilio (NYSE:TWLO). With TWLO stock now down more than 36% as of this writing, investors may certainly be asking: What’s going on?
Well, it’s still earnings season and Twilio is the latest tech stock to get hammered after releasing a report. The company reported earnings after market close yesterday and they seemed to be not all that bad, at least at first glance.
For the third quarter, revenue of $983 million beat expectations for $972.2 million. So did the company’s loss of 27 cents per share, which was smaller than the consensus expectation for a 36 cent loss.
What gives?
Evidently, Twilio’s guidance is what has investors concerned. After a Bank of America double downgrade earlier this weak citing growth concerns, Twilio’s prepared remarks for its earnings call did not inspire investor confidence. The company noted that it expects to see a worsening macro situation, resulting in Twilio pulling its revenue target guidance moving forward. The company said the following:
“We still believe we’ll deliver attractive levels of growth going forward, but in the current market, we don’t believe 30%+ is achievable.”
Let’s dive into what this means for investors moving forward.
What’s Going on With TWLO Stock?
Indeed, with many earnings reports, the forward-looking guidance a company provides can matter much more than the backward-looking numbers it reports. This appears to be the case with Twilio today.
Most investors are already aware of the macro slowdown affecting tech names. Valuations are significantly down across the board, with TWLO stock now down more than 80% on a year-to-date (YTD) basis alone.
However, it’s the company’s implication that longer-term headwinds may erode its ability to grow at a 30% clip moving forward that has investors so worried. This is a key variable that has been plugged into most investor models and will need to be changed. Accordingly, today’s significant decline makes sense on such news.
Now, the question becomes whether the news is fully baked in or not. In my view, it will take a few days for the market to decide. For now, investors in TWLO stock will likely see more volatility as price discovery continues to take place.
On the date of publication, Chris MacDonald 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.
