© Reuters. From Bull to Bear Case: Twilio (TWLO) Earns 5 Downgrades in 3 Days, Shares Down 25%
By Senad Karaahmetovic
At least four brokerage firms cut their rating on Twilio (NYSE:) today after the company issued a weak Q4 guidance and held 2022 Analyst Day, which was described by analysts as “disappointing.”
a loss per share of $0.27 which is better than the average analyst estimate that called for a loss per share of $0.39. Revenue for the quarter came in at $983 million versus the consensus estimate of $973.34 million.
For this quarter, Twilio expects a loss per share between $0.16 and $0.11, worse than the consensus of a loss of $0.12 per share. Shares were especially hit by a weak revenue forecast, $1 billion (the midpoint) vs $1.07 billion consensus.
RBC analysts downgraded to Sector Perform, from Outperform, with a price target cut in half to $55 per share. The analyst said the guidance was “weak” while the Analyst Day, which was expected to be a positive catalyst, turned out to be “disappointing.”
During its Analyst Day, Twilio pulled its 30%+ growth target and said it now expects growth between 15-25%.
“We certainly did not expect such a dramatic cut and worry competition and mis-execution is to blame,” the analysts said in a client note.
They added that “the quarter and analyst day effectively went against the bull case on the stock.”
“We believe Twilio has good technology and is playing in a large market, but increasingly appears in need of a turnaround. While the stock looks cheap (1.5x EV/2023E revenue and 3.0x EV/2023E gross profit), we can no longer defend a positive stance on the name,” the analysts concluded.
Wells Fargo analysts said there is a “long journey ahead” for Twilio, hence a downgrade to Equal Weight from Overweight.
“The 4Q guide and investor day session that followed, however, to us present a tough leap of faith, even with the declines in performance (-75% YTD vs. NASDAQ -34%) given: the sharp pivot away from growth towards margin, potential for macro headwinds to still surface more meaningfully in this primarily usage-based model, and the amount of time needed to execute on a favorable mix towards software + margin improvement,” the analysts said in a note, before adding:
“While we still believe in the extensibility of the underlying comms platform and acknowledge this is a tough time to throw in the towel, we come away expecting this transition will take time and significant effort before it can prove able to provide meaningful valuation support and expect TWLO shares will remain challenged until then.”
Cowen and BTIG analysts also downgraded TWLO stock. Two days ago, Bank of America cut its rating on TWLO shares by two notches to Underperform.
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