Is Twilio Stock a Buy Now?

 Is Twilio Stock a Buy Now?

Twilio (NYSE: TWLO ) released its second quarter report on August 8th. The cloud communications platform provider's revenue rose 10% year over year to $1.04 billion, beating analysts' estimates by $53 million. Its adjusted earnings per share of $0.54 cleared the consensus forecast of $0.24 and improved from an adjusted loss of $0.11 a year ago.

Twilio shares rallied slightly after that earnings beat, but are still down nearly 30% over the past 12 months and remain nearly 90% below their all-time high. Is Twilio still worth buying as a flip in this unpredictable market? Twilio's cloud platform processes integrate text messages, voice calls, authentication tools and other communication functions for mobile applications. Instead of building these features from scratch—which can be time-consuming, error-prone, and difficult to scale as an app gains more users—companies like Airbnb and Lyft outsource them to Twilio with just a few lines of code.

 So if you've ever used the Airbnb app to contact a host or the Lyft app to send a message to a driver, you've tapped into Twilio's behind-the-scenes platform. Twilio charges usage-based fees whenever its platform is accessed. Twilio's advantage in this area allowed it to grow like a weed after its public introduction in 2016. Between 2016 and 2020, its annual revenue grew at a compound annual growth rate (CAGR) of 59%, from $277 million to $1.76 billion.

Part of this growth was due to acquisitions. But during its investor day in October 2020, Twilio said it could grow its organic revenue by at least 30% by 2024. That ambitious long-term outlook attracted a wave of bulls, and Twilio shares soared to a record high of $443.49 in February. 18, 2021. But Twilio set the bar too high, and its stock plummeted once it became clear that it would largely miss its lofty goals.

Another quarter of slowing growth

Twilio's revenue grew 61% in 2021 (42% organic), but only grew 35% in 2022 (30% organic). That slowdown has worsened over the past year as revenue growth cooled, it acquired fewer active customers and its net expansion rate (DBNER, or its year-over-year revenue growth per existing customer) decreased. She blamed the slowdown on macro headwinds that have forced many companies to cut spending on software and new application development. Twilio expects this slowdown to persist with 0% to 1% revenue growth in the third quarter.

On an organic basis, which excludes sales of its Internet of Things (IoT) unit in June and its ValueFirst division in July, it expects revenue to rise 3% to 4%. Analysts expect Twilio's full-year revenue to grow just 6% to $4.1 billion. But during the conference call, CEO Jeff Lawson said he was "optimistic" that Twilio's "bookings will improve toward the end of the year and that revenue growth will accelerate again during 2024." Analysts also expect its 2024 revenue to grow 12 %.

But its operating margins are still expanding

As Twilio's revenue growth cooled, the integration of acquisitions, tougher competition and higher carrier fees (which telecom companies charge for access to their networks) all reduced adjusted gross margin from 56% in 2020 to 51% in 2022. In 2018, its adjusted gross margins stabilized -- and its adjusted operating margins returned to positive numbers after it laid off thousands of employees and implemented other cost-cutting strategies. Twilio expects its adjusted operating margins to expand further in the second half of the year. It raised its full-year adjusted operating income from $275 to $300 million to $350 to $400 million.

Twilio has also bought back $500 million in shares since approving a $1 billion buyback plan in February and is reducing its stock-based compensation to reduce its generally accepted accounting principles (GAAP) net losses.

It narrowed its second-quarter GAAP net loss from $323 million to $166 million year-over-year, and analysts expect it to narrow its net loss from $1.26 billion in 2022 to $771 million in 2023. However, those steep GAAP losses they may still make Twilio an unattractive stock to own as long as interest rates remain elevated.

Is it a good time to buy Twilio?

With an enterprise value of $8.3 billion, Twilio is trading at just double this year's sales. That's a low valuation, but bulls will likely continue to shun the stock until the macro environment improves and its earnings growth accelerates. So for now, I wouldn't rush to buy Twilio -- especially since so many other high-quality tech stocks are still on sale. When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they've been running for over a decade, the Motley Fool Stock Advisor, has tripled the market.*

They've just revealed what they believe are the ten best stocks for investors to buy right now... and Twilio isn't one of them! That's right - he thinks these 10 stocks are an even better buy.Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Airbnb and Twilio. The Motley Fool has a disclosure policy.

When it comes to investing in the tech sector, few companies have grabbed the spotlight like Twilio. Known for its innovative cloud-based communications platform, Twilio is popular with investors looking for growth opportunities. But with the ever-changing stock market landscape, is Twilio stock still a buy? In this article, we dive into a comprehensive analysis and explore the key factors that make Twilio an interesting investment option right now.

Understanding the current performance of a company's stock is essential when making investment decisions. Twilio has experienced significant growth in the past, benefiting from its unique position in the cloud communications industry. However, share prices can be volatile and it is essential to evaluate recent trends.

One of the main attractions for investors is the company's ability to innovate and adapt to changing market demands. Twilio has consistently demonstrated its commitment to innovation, expanding its product offerings, and maintaining a strong position in the cloud communications market.

Assessing the financial health of a company is a fundamental aspect of investment analysis. Investors should examine key financial ratios such as revenue growth, profitability and debt levels to assess the company's overall stability. The technology industry is highly competitive, and staying ahead of the curve is critical to long-term success. Since you are considering Twilio as an investment, it is critical to analyze industry trends and how Twilio is doing compared to its competitors.

No investment is without risk, and it's important to be aware of potential issues that could affect the performance of Twilio stock. Market fluctuations, regulatory changes, and unforeseen events can all affect a stock's trajectory.

Twilio is an outstanding player in the technology sector with a history of innovation and growth. However, as with any investment, it is essential to conduct thorough research and consider the risks involved. By analyzing Twilio's recent performance, growth prospects, financial health, industry trends and potential risks, investors can make an informed decision about whether Twilio stock is a buy now.