Bear of the Day: Twilio (TWLO)

Bear of the Day: Twilio (TWLO)

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I final wrote about Twilio TWLO, the $65 billion enterprise software program communications platform, in Might as their earnings outlook had taken a flip down. This is what I noticed…

Whereas analyst EPS estimates saved dropping in March, they only took one other flip south after the corporate’s Q2 report on Might 5.

And that quarterly replace was digested with a inventory worth plunge from $335 to $275 by the second week of Might.

In simply the previous two weeks for the reason that firm report, the analyst consensus for TWLO EPS progress for 2021 has dropped from a lack of 13-cents per share to -19 cents.

That represents a flip of fortune from profitability in 2020 to a minus 180% annual loss.

As I wrote in Feb, “Whereas common analyst worth targets moved as much as north of $500, the inventory might be due for a pause as earnings momentum decelerates.”

So the place are we now? TWLO stays a strong participant in a small-but-growing area of interest and their projected 43% income progress to prime $2.5 billion this 12 months verifies this.

Shopping for below $300 for the long run would appear to make some sense because it nonetheless trades below 20X subsequent 12 months’s projected topline of $3.25 billion, representing 30% progress.

(finish of Might 26 article excerpt)

Twilio continues to be a cloud darling for clever company comms, with a brilliant future, however a temporary-turned-persistent squall on EPS progress. The latter is what places TWLO into the cellar of the Zacks Rank, no matter gross sales progress, no matter how a lot they’re making key investments for his or her future.

After their July 29 Q2 report, the analyst EPS consensus for this 12 months acquired slashed from -18 cents to -28 cents, representing a 222% annual decline.

Complete revenues elevated a whopping 67% 12 months over 12 months to $668.9 million and surpassed the consensus mark of $597.7 million. Twilio’s newly acquired Section enterprise contributed $46.6 million to the corporate’s whole revenues. The acquisition of ValueFirst additionally acted as a tailwind.

Twilio is benefiting from the fixed growth of its worldwide enterprise in addition to the continual acceleration of digital transformation tasks throughout many industries. Within the quarter below evaluate, the corporate skilled new buyer progress with a robust internet growth fee.

The highest-line progress was primarily pushed by enhancement of buyer experiences throughout varied product portfolios like SendGrid, Section and Flex that are its fastest-growing SaaS merchandise at current.

Quarterly Particulars

Twilio’s dollar-based internet growth fee was 135% within the reported quarter, up from the 133% recorded within the earlier quarter and 132% within the year-ago quarter.

Twilio’s energetic buyer accounts elevated to greater than 240,000 as of Jun 30, 2021, from 235,000 on the finish of first-quarter 2021 and 200,000 on the finish of second-quarter 2020. Within the second quarter, Twilio Section buyer accounts had been additionally included within the energetic buyer accounts.

Primarily based on this momentum, analysts have saved topline progress in prime view with $2.66 billion projected for this 12 months, representing 51% progress, whereas 2022 targets $3.44 billion, for a 29% advance.

Giant traders who love the corporate and its long-term progress outlook should still be cautious right here with the persistent EPS erosion and a Worth/Gross sales valuation nonetheless close to 20 instances.

However what I stated in Might turned about to be stellar recommendation: “Shopping for below $300 for the long run would appear to make some sense because it nonetheless trades below 20X subsequent 12 months’s projected topline of $3.25 billion, representing 30% progress.”

I’d replace my information right here to “Purchase close to $350” for those who get the prospect. And do not hurry as we have to see the EPS estimates cease happening and begin heading again up.

The Zacks Rank will let you already know.

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Disclosure: I personal AMD, SQ, and NVDA for the Zacks TAZR portfolio.

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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.


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