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Bear of the Day: Twilio (TWLO)

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Twilio (TWLO - Free Report) is an exciting SaaS company that has more than quadrupled in the past year from a $15 billion provider of advanced corporate cloud communications to a $60B enterprise serving the top names in the Fortune 1000.

Twilio’s innovative Programmable Communications Cloud software allows developers to embed voice, messaging, video and authentication capabilities into any corporate "comms" platform. Plus, their API allows software developers to programmatically channel all these functions automatically for real-time customer engagement.

Twilio delivered better-than-anticipated fourth-quarter 2020 results last week as the company posted non-GAAP earnings of 4 cents per share for the quarter, while the Zacks Consensus Estimate was pegged at a loss of 8 cents. The non-GAAP bottom-line figure is flat, year on year.

Twilio’s quarterly revenues surged 65% year over year to $548.1 million, massively surpassing the Zacks Consensus Estimate of $454.6 million on an increase in clientele and the adoption of their Segment platform. The growing adoption of Twilio Flex is also a tailwind.

Twilio is benefiting from the accelerated digital-transformation across many industries, owing to the remote-working wave amid the COVID-19 pandemic. Organizations are reconfiguring their set-ups for a work-from-home operational environment and making "e-business" and "e-work" nearly majority realities.

So why, with the company on track to 30% growth and $3 billion in sales next year -- thus trading at only 20X sales in an overheated software market full of 40X sales wind-bags -- is TWLO in the cellar of the Zacks Rank?

The simple answer is always the same: because Wall Street analysts have lowered their growth forecasts in the medium term.

In just the past few weeks since the company report, the analyst consensus for TWLO EPS growth has dropped from a loss of 3-cents per share to -12 cents.

And next year is no brighter with a drop from a projected profit of 35-cents to just +18 cents EPS.

While average analyst price targets moved up to north of $500, the stock is probably due for a pause as earnings momentum decelerates.

There will be a time to ride TWLO higher and the Zacks Rank will let you know.

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