What happened
Shares of Twilio (TWLO +23.83%) popped as much as 22.3% this week, according to data from S&P Global Market Intelligence. The digital verification, customer engagement, and application programming interface (API) company's CEO spoke at an investor conference this week and reaffirmed long-term financial guidance. Popular technology stocks like Twilio are also generally rising this week, spurred by the artificial intelligence (AI) revolution.
As of the market close on Thursday, May 25, shares of Twilio are up 15.4% this week but are still down 41% over the past 12 months.
So what
A few days ago, Twilio CEO Jeff Lawson spoke at the J.P. Morgan global technology conference. Lawson reiterated that the company is moderating its corporate spending and aims to achieve profitable growth over the next few years. Lately this has been a big issue for Twilio, which has posted an operating loss every year for the last five, losing $933.5 million over the last 12 months alone.
To do this, Twilio is moderating its hiring and recently laid off 17% of its workforce. As a capital-light digital company, the majority of Twilio's overhead costs are employee salaries, so this should be a big help as these expenses come off the income statement over the next few quarters. The company is already making steady progress, with non-GAAP operating income (which excludes stock-based compensation) expected to be in the range of $275 million to $350 million this year. However, investors should take note that the company still expects to lose money on a generally accepted accounting principles (GAAP) basis until 2027, or four years from now. It still needs a lot of progress to improve its income statement.
It is also possible Twilio is soaring because all of its peers in the software market are soaring. The market has fallen in love with all things AI at the moment, driving up stocks like Nvidia by more than 100% year to date. Twilio has not discussed being a direct beneficiary of the AI revolution, but it is possible it is seeing a benefit from technology stocks generally rising again.
NYSE: TWLO
Key Data Points
Now what
Twilio was an investor favorite during the 2020-2021 stock market boom. But since the market crash in unprofitable growth stocks, the stock has been forgotten. Even after this solid week of returns, shares are still down 87% from all-time highs. That means if you invested $100 in Twilio when the stock peaked, you'd only have around $13 left today. Investors considering a position in Twilio should exercise caution.
