What happened
Shares of Twilio (TWLO 0.94%) were sliding again last month after the cloud stock offered disappointing guidance in its third quarter and got hit by macro concerns later in the month.
According to data from S&P Global Market Intelligence, the stock finished August down 18%. As you can see from the chart below, Twilio shares briefly popped in anticipation of the second-quarter earnings report, but it gave up those gains once the numbers came out. The stock fell further in the second half of the month on fears of rising interest rates.
So what
Twilio, which provides cloud software to handle text-based and other communications for companies like Uber, fell 13.5% on Aug. 5 after the company beat estimates in its Q2 earnings report, but its guidance wasn't strong enough.
Twilio said revenue jumped 41% to $943.4 million, ahead of estimates at $919.4 million. Organic revenue was up 33% as its acquisition of Zipwhip added $34 million. Dollar-based net-expansion rate rose 123%, showing existing customers increased their spending by 23% over the last year. It also said it signed its largest deal ever for Twilio Flex, its contact-center product that layers on top of the core communications platform.
On the bottom line, the company reported an adjusted loss per share of $0.11, which was even with a year ago but better than estimates at a per-share loss of $0.20.
Guidance, however, underwhelmed the market. Management forecast revenue of $965 million to $975 million in Q3, or 30% to 32%, which compares to the consensus at $977.9 million. Its forecast of an adjusted loss of $0.37 to $0.43 was also much worse than expectations of $0.10, showing the company isn't cutting costs at a time when the market is valuing profitability over growth.
Several analysts downgraded the stock or lowered their price targets in response to the news, questioning the company's ability to turn profitable and scale its higher-margin products.
The following week, it reported a customer hack, though investors shrugged off that news, and the stock slumped in the second half of August after Fed Chair Jerome Powell said there could be economic pain as interest rates rise.
Now what
Like other cloud stocks, Twilio was once a market darling, but the stock has fallen sharply as growth has slowed and profits have yet to materialize. While some of its peers seem to be more focused on the bottom line, Twilio has not shown the same restraint. Given the market mentality these days, it may take some improvement on the bottom line for the stock to rebound.
