Twilio (TWLO) Stock Plummets 12% on Decelerating Sales Growth, Weak Q4 EPS Outlook and COO Departure, Analysts Lower PTs but Remain Optimistic

October 28, 2021 6:41 AM EDT
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Price: $286.94 +1.07%

Rating Summary:
    30 Buy, 5 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 2 | New: 5
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Shares of Twilio (NASDAQ: TWLO) are down over 12% in pre-open Thursday after the company reported disappointing earnings guidance.

Twilio reported Q3 EPS of $0.01 to easily beat the analyst estimate of negative $0.14. Revenue for the quarter came in at $740.2 million versus the consensus estimate of $680.49 million.

“We delivered another quarter of strong growth at scale in the third quarter as companies continue to turn to Twilio in this digital-first world. We are extremely excited about the next generation of our customer engagement platform, and our newest pillar, Twilio Engage, which will allow companies of all sizes and in any industry to build and optimize hyper-personalized marketing campaigns on every channel for customer acquisition, conversion and retention," said Jeff Lawson, Twilio’s co-founder and CEO.

Investors were disappointed to hear that Twilio projected Q4 2021 EPS of negative $0.26 to negative $0.23, versus the consensus of negative $0.07. Twilio sees Q4 2021 revenue of $760 million to $770 million, versus the consensus of $744.7 million.

Furthermore, Twilio reported that COO George Hu is resigning from the company, effective October 27, 2021. He will continue to serve as a strategic advisor to help with the transition with CFO Khozema Shipchandler now appointed to the position of Chief Operating Officer.

Mizuho analyst Siti Panigrahi reiterated a Buy rating but lowered the price target to $375.00 per share from the prior $430.00 as decelerating organic growth creates near-term pressure.

“Decelerating organic revenue growth of 38% (vs. 50% in Q2), weak Q4 guidance, and a falling DBNE brings closer scrutiny along with uncertainty in gross margin trajectories, which caused weakness in shares after the market close. Although facing a difficult Q4 comp, we view Twilio's growth trajectory as a promising one in 2022 and beyond as the company expands from a communication infrastructure to a customer engagement platform (CRM 3.0) and cloud contact centers. We therefore reiterate our Buy rating, but lower our PT to $375 on near-term pressures and reduction of peer multiples,” Panigrahi said in a client note.

Similarly, Needham & Company analyst Ryan Koontz also lowered the price target to $400.00 per share from the prior $460.00 on the Buy-rated TWLO stock.

“Surprising departure of COO George Hu, who we have viewed as critical to the maturity of GTM execution, opens new risk in the transition to a lieutenant CRO. Despite the pull-back in the stock (-13% AH), we view TWLO's market leadership as durable given the company's highly differentiated developer-led GTM. We raise our C22 revenue estimate by 2% and reduce our EPS estimate on higher opex and more modest GM expansion,” Koontz said in a client note.

Shares closed at $345.66 yesterday.

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