Twilio share price: what to expect in Q1 earnings

Twilio’s share price is one of the few stocks to be up this year. As a cloud-based communications platform, its services are in demand. Companies who have been forced into remote working due to the coronavirus outbreak are now looking to ditch legacy systems and move to the cloud. This should mean plenty of new business for Twilio once lockdowns are eased over the world.

Yet with Twilio’s [TWLO] share price likely to be volatile in the short-term, should traders wait for the dip or buy now in the hope of long-term rewards? This week’s Q1 earnings should offer some clues.



What's happening with Twilio's share price?

Twilio's share price is up over 12.4% so far this year, trading at around the $116 level. Like others, the stock plummeted at the end of February as the coronavirus took hold. However, since the middle of March Twilio's share price has shot up over 50%.


When is Twilio reporting Q1 results?

6 May


Why should investors care?

JP Morgan turns bearish on tech stocks

JP Morgan downgraded Twilio from Overweight to Neutral at the end of March. This was part of a spate of downgrades that saw the bank slash ratings for six tech stocks as the ongoing pandemic took hold. In their view, investors are underestimating the duration and severity of the coronavirus.

"Investors are underestimating the severity of bookings impact across renewals, upsells and new-logo business," JP Morgan analyst Mark Murphy said in a note to investors.

“Investors are underestimating the severity of bookings impact across renewals, upsells and new-logo business” - JP Morgan analyst Mark Murphy


"At this juncture, we do not sense investors are adequately aware or realistically incorporating these developments into their thought process," Murphy added.

While JP Morgan trimmed its rating, it maintained its $110 share price target on the stock.


Strong balance sheet

Twilio plays into a number of upcoming IT trends, at least that's the view of Kayode Omotosho writing on Seeking Alpha. Omotosho highlights the app's integration with third-party tools and a strong balance sheet. Both of which should help it 'weather a short-lived economic recession'.

However, the company is yet to make a profit and will face cash flow problems from customers during the outbreak. Omotosho reckons that Twilio will see a slowdown in demand during the pandemic. Afterwards, the company should have built up enough leads to expand its sales pipeline as a recovery continues.

According to Omotosho, "the safe bet is for investors to wait until the next earnings call to add to their position."


Stands to benefit from the pandemic

So what about these leads Omotosho mentions? In a way, the coronavirus has been a wake up call for companies. Some companies have been able to seamlessly operate remotely. Others haven't. This is where a cloud-based telecoms company like Twilio can benefit by offering business continuity services.

Mizuho Securities highlighted this when they initiated coverage on Twilio in mid-April. Mizuho analysts wrote:

“[Twilio] stands to benefit from COVID-19, as our checks suggest it was a significant wakeup call to adopt cloud-based contact centers and messaging platforms.”

“[Twilio] stands to benefit from COVID-19, as our checks suggest it was a significant wakeup call to adopt cloud-based contact centers and messaging platforms” - Mizuho Securities analysts


Mizuho expects Twilio to benefit from API integrations and the 'adoption of cloud contact centers'. Mizuho put a Buy rating on Twilio's stock and a $125 price target - a 15.7% upside.

Traders should definitely keep an eye out for any update on new business when Twilio updates the market.


What do the analysts think?

Wall Street expects Twilio to post a loss of $0.11 a share, down from earnings of $0.05 a share in the same quarter last year. Revenue is expected to come in at $331.88 million, up 42.4%.


Twilio's expected Q1 revenue - a 42.4% rise



Time to buy Twilio’s share price?

Of the 13 analysts tracking the share price on Yahoo Finance, 10 rate it either a 'Strong Buy' or 'Buy'. Twilio carries an average 12-month share price target of $129.05. Hitting this would represent a 12% upside on the current share price.

For investors, it could be worth waiting for a dip in Twilio's share price before buying. Markets are highly volatile and Twilio’s share price is bound to be up and down while the pandemic continues. But in the long-term, Twilio stands to gain as companies look to build their cloud communications capabilities.


Market Cap$16.147bn
Operating Margin (TTM)-31.20%
EPS (TTM)-2.36
Quarterly Revenue Growth (YoY)62.10%

Twilio share price vitals, Yahoo Finance, 5 May 2020

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