Bearish Analysts Blast Twilio After Earnings

Skepticism had been ramping up on TWLO ahead of earnings

Oct 31, 2019 at 10:11 AM
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Twilio Inc (NYSE:TWLO) reported adjusted third-quarter earnings of 3 cents per share on $295.1 million in revenue -- more than analysts were expecting. However, the cloud concern also said base revenue for the three-month period missed estimates, and it lowered its full-year profit forecast and tightened its revenue guidance, which is likely what has the shares down 11% at $95.81.

A round of bearish analyst notes is exacerbating pressure on TWLO shares, too. In addition to a downgrade to "neutral" from "buy" at Monness, Crespi, Hardt, no fewer than seven price-target cuts have come through, including several to $125 -- with one from RBC -- still a 16% premium to last night's close at $107.70. The bulk of analysts are still bullish on Twilio, with the vast majority in coverage maintaining a "strong buy" rating, and the average 12-month price target docked at $141.62.

Options traders, meanwhile, were more skeptical than usual ahead of earnings. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Twilio stock's 10-day put/call volume ratio of 0.96 ranks in the 94th annual percentile, meaning puts have been bought to open relative to calls at an accelerated clip.

Short sellers have increased their exposure to the cloud stock, too. Short interest jumped 9.7% in the two most recent reporting periods to 17.38 million shares. These bearish bets account for more than 15% of Twilio stock's available float, or 4.4 times the average daily pace of trading.

On the charts, TWLO shares have been sliding since their summer peak above $150, down roughly 35%. Today's drop puts the stock on track for its biggest one-day drop since Nov. 19, when it plunged 13.8%, and headed for its lowest close since early January.


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