Shares of Twilio (TWLO 0.49%), a cloud-based communications software company, sank today after an analyst downgraded the company's stock and cut his price target for Twilio's shares by more than half.
Twilio will report its third-quarter results after the bell tomorrow, but investors weren't waiting around for it. The tech stock was down 7.5% as of 3 p.m. ET.
Bank of America analyst Michael Funk, who was previously bullish on Twilio, downgraded the company's stock rating to underperform and cut the price target for the stock to $85, a 51% decrease from the previous price target of $175.
A few things appeared to spark Funk's pessimism in Twilio, including a recent survey of current Twilio customers that showed that slightly more than half of respondents expect to spend less on Twilio's platform next year than they did in 2022.
Funk is also concerned that "competitive pricing pressure may be intensifying" and that macroeconomic effects could have a negative impact on Twilio.
"We believe there is downside risk to FY23 consensus revenue, which has not kept pace with the deteriorating economic environment," Funk said in his research note.
Some investors saw Funk's downgrade of Twilio's stock, the price target cut, and the pessimistic comments as more than enough reason to head for the exits.
But investors will get a true picture of how Twilio is doing when the company reports its third-quarter results after the market closes tomorrow.
Wall Street's average estimate is for a loss of $0.36 per share in Twilio's third quarter, which would be a steep drop from the earnings of $0.01 in the year-ago quarter.