Twilio Stock: Price Slumps Over 30% Post Q3 Earnings!
Shares of cloud-communications
platform Twilio (NYSE:
TWLO) fell over 30% on Friday after the company
announced its Q3 results. Twilio reported revenue of $983 million
and an adjusted loss of $0.27 per share. Wall Street forecasted
Twilio to report revenue of $972.2 million and an adjusted loss of
$0.36 per share. In the year-ago period, Twilio’s revenue and
earnings per share stood at $364.5 and $0.01,
Twilio forecasted sales between
$995 million and $1 billion in Q4, lower than estimates of $1.07
billion. It also expects losses to range between $0.11 per share
and $0.06 per share, compared to estimates of a loss of $0.12 per
While Twilio failed to meet
earnings estimates in Q3 and provided a less-than-impressive
outlook for Q4, the sell-off was driven after the company explained
its revenue growth target of 30% is not achievable going
The company stated, “Turning to
guidance, weU+02019ve incorporated the impact from the dynamic
macro environment into our guidance for the fourth quarter, and
weU+02019re initiating revenue guidance of $995 million to $1.005
billion, for year-over-year growth of 18%-19% for both reported and
Similar to its software peers,
Twilio’s business is also impacted by a challenging macro
environment leading to tepid guidance for Q4, which accelerated the
sell-off in TWLO stock.
Right now, shares of Twilio are
down a whopping 90% from all-time highs, burning significant
investor wealth in the process.
Is TWLO stock a buy or sell right now?
Twilio’s platforms allow
developers to build, scale and operate customer engagement within
software applications. This customer engagement platform also
offers a set of application programming interfaces to handle an
advanced level of communication logic and improve engagement
Twilio suite of products and
services allowed the company to end the quarter with 280,000 active
customer accounts, up from 250,000 customer accounts in the
Valued at a market cap of $8.4
billion, Twilio is a beaten-down tech stock trading at a depressed
multiple. Analysts expect the company to increase sales by 34% to
$3.81 billion in 2022 and by 17.6% to $4.48 billion in 2023.
Further, its losses per share are forecast to widen to $0.49 in
2022 from $0.25 per share in 2021.
Twilio stock is priced at just
over 2.3 times forward sales which is not too steep. However, it
remains unprofitable, which might concern investors despite the
company’s cash balance of $4.21 billion at the end of Q3. Twilio’s
GAAP losses widened to over $480 million in Q3, compared to a loss
of $224 million in the prior-year period.
TWLO stock is expected to remain volatile
Twilio’s widening losses and
decelerating revenue growth have sounded the alarm bells for
investors. The company’s sales surged from $277 million in 2016 to
$2.84 billion in 2021, indicating a compound annual growth rate of
59% in this period.
On the flip side, Twilio is well
positioned to stage a strong recovery if it can improve profit
margins and expand its customer base, which already includes
Airbnb (NYSE: ABNB), Lyft (NASDAQ: LYFT), and MercadoLibre
Another major reason for the
sell-off is Twilio’s dollar-based net retention rate which stands
at 122%. It means existing customers have increased spending by 22%
on the Twilio platform in the last 12 months. But in the last year,
its net retention rate stood much higher at 131%.
Investors can expect price target
estimates for TWLO stock to move lower in the next month on the
back of its revenue growth forecast. Prior to its earnings, TWLO
stock had a price target of $86, which is 90% above its current
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