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Twilio (TWLO) to Post Q1 Earnings: Disappointment in Store?
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Twilio Inc. (TWLO - Free Report) is slated to release first-quarter 2018 results on May 8. In the last-reported quarter, the company posted narrower-than-expected loss, resulting in a positive surprise of 50%. Notably, Twilio delivered better-than-expected results in the trailing four quarters, with an average positive surprise of 36.9%.
Let’s see how things are shaping up prior to this announcement.
What the Zacks Model Unveils?
Our proven model does not conclusively show that Twilio is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
It should be noted that stocks with a Zacks Rank #4 or 5 (Sell rated) are best avoided, especially when the company is seeing negative estimate revisions.
Twilio currently carries a Zacks Rank of 3 and has an Earnings ESP of -21.62%, which makes surprise prediction difficult. Furthermore, the Zacks Consensus Estimate for first-quarter earnings remained unchanged, over the past 30 days.
In addition, the Zacks Consensus Estimate projects loss per share to widen to 7 cents from the year-ago quarter’s loss of 4 cents. However, analysts polled by Zacks anticipate revenues to be up 32.6% year over year to $115.9 million.
We believe Twilio’s top line will reflect the benefit from its continued focus on rolling out products, global expansion and go-to-market sales strategies, which will have more than offset the loss of revenues from troubles with one of its major customer. However, the company’s bottom-line results might have been affected by escalating expenses.
We remain concerned about the company’s shrinking gross margin, which has worsened over the past two quarters, touching its lowest level in the last three years. The company’s gross margins have been negatively impacted by shift in international traffic mix and reduced revenue contribution from Uber.
Furthermore, the company’s aggressive research and development, and sales strategies are driving revenues, however, at the cost of its profitability. It should be noted that due to elevated expenses, the company posted non-GAAP loss of $3.9 million during the fourth quarter of 2017, as against non-GAAP operating profit reported in the year-ago quarter.
We expect the situation to have remained intact in the to-be-reported quarter as well, thereby thwarting the company’s bottom-line results.
Go-to-Market Sales Strategy to Boost Top line
Twilio has been striving to gain more enterprise customers, as they bring in stable revenues for the long term. The company mainly generates sales through its online model, but in order to grab more market share, it has increased investment on building traditional sales team.
Furthermore, Twilio, last year, rolled out a plan for enterprise customers with more compliance, administrative and security features — Enterprise Plan — which, we believe, will drive its enterprise customer growth. Notably, its strategy has started paying off well as reflected from the fact that the company signed its first enterprise license agreement during third-quarter 2017, of nearly eight figures, and the number outgrew in the fourth quarter.
The strategy is likely to benefit the company in gaining more enterprise customers in the quarter to be reported. Additionally, as a rising number of companies are making a switch to the cloud, Twilio looks poised to ride the growth trend over the long run.
Uber Loss to Partially Impede Revenue Growth
Twilio made a terrific run after its stock market debut in June 2016, wherein the company’s share price tripled in the next three months. However, the momentum didn’t last long as the company’s biggest customer, Uber, decided to move away from the platform, which turned investors cautious.
Notably, Uber uses Twilio for a variety of used cases, such as driver and rider communication, driver marketing and several others. Till 2016, Uber used Twilio’s platforms in most of its geographical operations.
However, since second-quarter 2017, Uber has been “optimizing by used case and by geography” and is planning to "move communications for some use cases in-app." This means that Uber is now trying to operate its messaging services internally.
This, in turn, has marred Twilio’s overall financial performance. Uber’s contribution to Twilio’s revenues has now declined to approximately 5% in fourth-quarter 2017, from roughly 17% in fourth-quarter 2016.
Looking at this, we expect the company to witness even lower revenue contribution from Uber, thereby impacting overall revenue growth rate for the first quarter.
Furthermore, heightening competitive threats from last year’s listed Bandwidth Inc. (BAND - Free Report) might impede Twilio’s revenue growth rate. Though the rival is still very small in comparison, the like of clients it has added in the recent past makes us believe it can grab market share from Twilio. Notably, Bandwidth has around 850 customers against Twilio’s 40,000, but its client list includes names like GoDaddy Inc. (GDDY - Free Report) , Alphabet’s (GOOGL - Free Report) Google Voice, and Skype.
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Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
Twilio (TWLO) to Post Q1 Earnings: Disappointment in Store?
Twilio Inc. (TWLO - Free Report) is slated to release first-quarter 2018 results on May 8. In the last-reported quarter, the company posted narrower-than-expected loss, resulting in a positive surprise of 50%. Notably, Twilio delivered better-than-expected results in the trailing four quarters, with an average positive surprise of 36.9%.
Let’s see how things are shaping up prior to this announcement.
What the Zacks Model Unveils?
Our proven model does not conclusively show that Twilio is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
It should be noted that stocks with a Zacks Rank #4 or 5 (Sell rated) are best avoided, especially when the company is seeing negative estimate revisions.
Twilio currently carries a Zacks Rank of 3 and has an Earnings ESP of -21.62%, which makes surprise prediction difficult. Furthermore, the Zacks Consensus Estimate for first-quarter earnings remained unchanged, over the past 30 days.
In addition, the Zacks Consensus Estimate projects loss per share to widen to 7 cents from the year-ago quarter’s loss of 4 cents. However, analysts polled by Zacks anticipate revenues to be up 32.6% year over year to $115.9 million.
We believe Twilio’s top line will reflect the benefit from its continued focus on rolling out products, global expansion and go-to-market sales strategies, which will have more than offset the loss of revenues from troubles with one of its major customer. However, the company’s bottom-line results might have been affected by escalating expenses.
Twilio Inc. Price and EPS Surprise
Twilio Inc. Price and EPS Surprise | Twilio Inc. Quote
Rising Expenses to Have Dampened Profitability
We remain concerned about the company’s shrinking gross margin, which has worsened over the past two quarters, touching its lowest level in the last three years. The company’s gross margins have been negatively impacted by shift in international traffic mix and reduced revenue contribution from Uber.
Furthermore, the company’s aggressive research and development, and sales strategies are driving revenues, however, at the cost of its profitability. It should be noted that due to elevated expenses, the company posted non-GAAP loss of $3.9 million during the fourth quarter of 2017, as against non-GAAP operating profit reported in the year-ago quarter.
We expect the situation to have remained intact in the to-be-reported quarter as well, thereby thwarting the company’s bottom-line results.
Go-to-Market Sales Strategy to Boost Top line
Twilio has been striving to gain more enterprise customers, as they bring in stable revenues for the long term. The company mainly generates sales through its online model, but in order to grab more market share, it has increased investment on building traditional sales team.
Furthermore, Twilio, last year, rolled out a plan for enterprise customers with more compliance, administrative and security features — Enterprise Plan — which, we believe, will drive its enterprise customer growth. Notably, its strategy has started paying off well as reflected from the fact that the company signed its first enterprise license agreement during third-quarter 2017, of nearly eight figures, and the number outgrew in the fourth quarter.
The strategy is likely to benefit the company in gaining more enterprise customers in the quarter to be reported. Additionally, as a rising number of companies are making a switch to the cloud, Twilio looks poised to ride the growth trend over the long run.
Uber Loss to Partially Impede Revenue Growth
Twilio made a terrific run after its stock market debut in June 2016, wherein the company’s share price tripled in the next three months. However, the momentum didn’t last long as the company’s biggest customer, Uber, decided to move away from the platform, which turned investors cautious.
Notably, Uber uses Twilio for a variety of used cases, such as driver and rider communication, driver marketing and several others. Till 2016, Uber used Twilio’s platforms in most of its geographical operations.
However, since second-quarter 2017, Uber has been “optimizing by used case and by geography” and is planning to "move communications for some use cases in-app." This means that Uber is now trying to operate its messaging services internally.
This, in turn, has marred Twilio’s overall financial performance. Uber’s contribution to Twilio’s revenues has now declined to approximately 5% in fourth-quarter 2017, from roughly 17% in fourth-quarter 2016.
Looking at this, we expect the company to witness even lower revenue contribution from Uber, thereby impacting overall revenue growth rate for the first quarter.
Furthermore, heightening competitive threats from last year’s listed Bandwidth Inc. (BAND - Free Report) might impede Twilio’s revenue growth rate. Though the rival is still very small in comparison, the like of clients it has added in the recent past makes us believe it can grab market share from Twilio. Notably, Bandwidth has around 850 customers against Twilio’s 40,000, but its client list includes names like GoDaddy Inc. (GDDY - Free Report) , Alphabet’s (GOOGL - Free Report) Google Voice, and Skype.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>