Sometimes all it takes is a good sell-off to show you who your friends are. Twilio Inc. (TWLO +3.45%) took a hit last week after reports of a new Amazon.com (AMZN +1.36%) AWS feature was misread as a threat to its business. The dip proved temporary, as several analysts rushed to Twilio's defense, often clarifying that Amazon Pinpoint's new AWS two-way text messaging is actually powered by Twilio.
Amazon and Twilio are longtime partners, and the world's leading online retailer even acquired a small stake in Twilio just ahead of its IPO. The stock would bounce back, making up not just the ground it lost during last week's decline but also continuing to move higher. Twilio stock is trading at levels on Wednesday that investors haven't seen since mid-August. It's a quiet recovery, but a recovery nonetheless.
Image source: Twilio Inc.
Making sense of Twilio
Twilio was a blazing debutante when it hit the market last year, but the stock has shed more than half of its value since peaking a few months after its IPO. Growth is still there in strides. Revenue surged 49% in its latest quarter, well ahead of its earlier guidance. Profitability remains elusive and base revenue continues to decelerate, but it's hard to look a gift of 49% top-line growth in the mouth.
Twilio dominates its niche by providing in-app communications for many of the leading mobile applications. It's not the cheapest, and the stock's been rocked when a major developer like Uber or Lyft or even Amazon strays. However, at the end of the day, it's hard to argue with growth as a measure of success. There are now 43,431 customers on Twilio's platform, 41% more than where the count was a year earlier.
The Amazon news last week may have initially spooked the market, but it didn't take long for Twilio to say that it was in fact at least part of the process for the new AWS feature. At least five Wall Street pros -- KeyBanc, MUFG, Oppenheimer, Baird, and JMP Securities -- followed quickly with bullish analyst notes last week.
Investing in Twilio won't be a passive experience. It's bumping up against Nexmo and smaller players that may be hungrier to land popular developers. Thankfully, investors get quarterly updates on Twilio's progress. If Twilio's solutions are falling out of favor, we will know it, and the company has been frank in discussing the times when a major partner is kicking tires elsewhere.
For now, Twilio's doing a lot better than a stock that has fallen in half over the past year. It pushed its top-line guidance higher for all of 2017 back in August, lowering its projected deficit target along the way. Then again, saying that Twilio has plummeted 56% since peaking 13 months ago ignores the fact that the stock more than quadrupled in its first few months of trading. Twilio stock has actually more than doubled off last year's IPO price of $15. Execution will dictate if it doubles again, and as long as its platform and growing catalog of offerings continue to grow in popularity, Twilio will be on its way to being a millionaire maker.
