Shares of Twilio (TWLO) dropped in morning trading after the cloud communications company gave weaker than expected profit guidance for the current quarter and fiscal 2019.
EARNINGS AND GUIDANCE: For the fourth quarter, Twilio reported adjusted earnings per share of 4c, matching analysts' consensus estimate, on revenue of $204.3M, exceeding the Street's average forecast of $185M. The company reported 64,286 active customer accounts at December 31, compared to 48,979 last year.
Looking ahead, Twilio forecast first quarter adjusted EPS flat to 1c, below the 2c consensus, on revenue of $222M-$225M, compared to analysts' estimates of $185.55M. Base revenue for the quarter is expected to be $212M-$214M. The company also forecast FY19 adjusted EPS of 8c-11c, below analysts' estimates of 16c. Revenue for the fiscal year is seen at $1.065B-$1.077B, with base revenue of $1.028B-$1.036B, against analysts' estimates of $829.51M. Twilio's guidance included the $2B acquisition of SendGrid, it noted.
EXECUTIVE COMMENTARY: Jeff Lawson, Twilio's co-founder and chief executive officer, said in a statement that "the power of our platform model was evident in our results once again, as Q4’s exceptional results capped off an incredible 2018." He added that Twilio is "excited to add email to our platform through the acquisition of SendGrid and look forward to helping our customers drive their customer engagement strategies across all of the important communication channels -- voice, messaging, video, and, now email." Citing an interview, Bloomberg reported that Lawson said the company's core businesses are growing "very nicely." He added that his goal is to optimize spending for growth instead of profit taking. He added that Twilio is always looking for tuck-in technology acquisitions.
ANALYST COMMENTARY: Following Twilio's Q4 report, several analysts raised their price targets on the stock. Piper Jaffray analyst Alex Zukin raised his price target for Twilio to $135, saying that with Flex starting to gain traction, ongoing potential for synergies with SendGrid, and continued strong execution, he remains a buyer of the stock. Oppenheimer analyst Ittai Kidron raised his price target for Twilio to $125 as he sees upside from robust base revenue growth, conservatively-guided variable revenues, and cross-selling Twilio's voice/text products to SendGrid's customer base, all of which solidify Twilio's long-term revenue growth trajectory. Canaccord analyst Richard Davis also raised his price target on Twilio to $125, saying he believes a combination of quarterly beats and raises, along with conservative guidance, could become a significant platform that could propel the stock higher from current levels. DA Davidson analyst Rishi Jaluria raised his price target on Twilio to $118 and noted that growth accelerated for the 4th consecutive quarter, while the company's lower than expected profitability guidance was related to its aggressive investment plans. KeyBanc analyst Brent Bracelin raised his price target for Twilio to $132 and contended that the $19M revenue beat on a "staggering" growth rate of 77% year over year demonstrates the growth potential inherent in Twilio's consumption-based revenue model. Deutsche Bank analyst Michael Turrin raised his price target for Twilio to $130 saying the company's Q4 results "showcase strength of this model." JMP Securities analyst Patrick Walravens, who called the company's year-over-year revenue growth of 77% in Q4 "remarkable" and "very impressive," raised his price target to $123.
Also weighing in on Twilio's results was Stephens analyst Dmitry Netis, who said he believes Twilio shares could see some pressure at the open given the stock's 29% year-to-date run-up ahead of the company's report and the view that its higher than expected expenses may overshadow its "strong" revenue beat and guidance.
PRICE ACTION: In morning trading, shares of Twilio are down 5% to $109.29.