I boosted Twilio (NASDAQ:TWLO) stock in June and I’m sorry I did.
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I liked how they were building an “API Economy.” They focused their attention and money on companies like Zipwhip, which supports texting. Twilio invested in Terazo, which offers software development as a service.
Twilio gained fame and fortune with “application programming interfaces,” better known as APIs, that let companies turn telephony into cheap internet services. Extending that with Segment, a customer data system that brings data from calls into the corporate silo, made good sense.
Since then, the stock hasn’t been going anywhere but down. It hit bottom in January at about $180. But now it’s coming back, as growth is welcomed back to the stock market party.
Closer to Fine
Yet… Twilio is still losing money.
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In the fourth quarter it lost $291 million, $1.63/share. But that came on revenue of $843 million, leaving a gross profit of $396 million. All that, and more, went out the door in research and marketing expenses, but analysts still liked it and the stock went up.
What they especially liked was that revenue number, 54% ahead of last year. They liked management’s prediction that they could make money, at least on an adjusted basis, in 2023. The revenue guidance for the March quarter was also ahead of expectations.
Overnight, the shares rose over $20/share. They were due to open Feb. 10 near $242. Not bad if you bought in January. Not good if you bought in late 2020, when Twilio’s ability to help companies cope with the pandemic made its stock a star.
Those were the days, my friend. You thought they’d never end. From a pandemic low of $80, shares surged to a February 2021 high of $435 each. There was another peak in July, at over $400, but the moves since have all been lower.
Where to Now?
Analysts haven’t given up on Twilio. There are 25 of them at Tipranks, and 24 say buy it. Their average price target of $336 is 76% ahead of its opening bid on Feb. 15.
If any were skeptical before, they’re keeping it quiet now. Suddenly they like its acquisitions. They like its guidance, revenue growing 40% – 44% from last year, organic growth at 30% – 34%. Now it’s combining strategic acquisitions with growth inside the core business. Now it’s engaging in smart expansion.
When I looked at Twilio again last month, near its low, I said that while the stock was broken, the company was not. It was a victim of changing times, the fear of inflation replacing the fear of disease. Growth had gone out of fashion, earnings were demanded.
I recommended it at about $200/share. I wasn’t sticking my neck out. Goldman Sachs (NYSE:GS) put out a buy note on the stock in December. Our Chris Lau counseled investors to consider buying Twilio once the correction ended.
The Bottom Line on TWLO Stock
I always advise that you buy good companies and make time your ally.
This can be tough to do with a company like Twilio, where the ups and downs are extreme.
I relate it to Moderna (NASDAQ:MRNA). Love the company, owned the stock. But I sold when its fate became too-attached to the pandemic and its Covid-19 vaccine. I’ll get back in when the pandemic is over.
As an investor, you can either be oblivious or be wary. If you prefer oblivious, you should have bought Twilio five years ago for around $20/share. But if you buy on a trend, like the pandemic, be aware that the party will end, and you may want to leave before the drinks run out. Come back only after the hangover is over.
The hangover looks to be over for TWLO stock.
On the date of publication, Dana Blankenhorn held no position in any stock mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at [email protected], tweet him at @danablankenhorn, or subscribe to his Substack.
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