Twilio Inc (TWLO) Bounces Off Familiar Support On Upbeat Analyst Outlook

Twilio Inc (NYSE:TWLO) has found a solid floor at double its IPO price -- and could have more room to run

Dec 30, 2016 at 10:30 AM
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Shares of Twilio Inc (NYSE:TWLO) are trading up 0.8% at $29.49, after an analyst at Drexel Hamilton named the cloud stock a top technology pick for 2017, saying the "disruptive, next-generation, cloud play should deliver the fastest sales growth" next year among all names being covered -- echoing a recent outlook. This runs counter to the withstanding bearish sentiment levied toward TWLO stock, which has been basing in the $29-$30 region recently, double its initial public offering (IPO). Should the shares take flight from this dependable floor, an unwinding of skepticism could help propel TWLO up the charts.

Specifically, six of the nine analysts that cover the shares of TWLO maintain a tepid "hold" recommendation. Elsewhere, although short interest dropped 2.8% in the most recent reporting period -- after topping out at a record high of 10 million shares sold short -- these bearish bets still account for a brow-raising 31.4% of the stock's available float. This leaves ample room for a round of upgrades and/or a continued round of short-covering, which could draw more buyers to TWLO's table.

Options traders, meanwhile, have been betting on a bounce. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 14,484 calls on TWLO in the past two weeks, compared to 5,329 puts. However, it's likely some of this activity -- particularly at out-of-the-money strikes -- is a result of short sellers hedging their bearish bets against any upside risk.

Regardless, now appears to be a prime time to purchase premium on Twilio Inc (NYSE:TWLO). In fact, the stock's Schaeffer's Volatility Index (SVI) of 62% is docked below all comparable readings taken in its short lifetime. Simply stated, low volatility expectations are being priced into the stock's short-term options -- a potential boon to premium buyers.

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