Stifel downgrades Twilio, slashes price target by 55%, citing weak outlook

Published Fri, Aug 5 20226:50 AM EDT

There's trouble ahead for Twilio after the communications software company issued weak guidance, according to Stifel. Analyst J. Parker Lane downgraded shares of Twilio to hold from buy, and slashed the target price by more than half, citing the company's recent earnings report that came out Thursday. Twilio reported a revenue beat but offered up a current-quarter forecast that came in below Wall Street expectations. "From a top-line perspective, we view the more moderated pace of expansion (123% DBNE vs. 135% in 2Q21, 127% in 1Q22), the projected decline in organic revenue growth (29-30% in 3Q22 versus 33% in 2Q22 and 35% in 2Q22), and the more uncertain macro environment as signals of near-term risk," Lane wrote in a Friday note. "More importantly, with non-GAAP gross margin stepping back to 51.0% during 2Q22 and the company projecting a wider operating loss than consensus for 3Q22, the timeline for achieving material profitability remains uncertain. As such, we are moving to the sidelines until we get a clearer picture on the progress towards 60%-plus G.M. and O.M. leverage," Lane continued. Stifel cut its price target on the stock by 55% to $90 per share from $200. The new price target is about 8% below Thursday's closing price of $98.19. Twilio shares dropped more than 8% in Friday premarket trading. Shares of Twilio were already under pressure, down more than 60% this year, as investors remain down on unprofitable tech companies. Twilio is dealing with an uncertain macro backdrop that's weighed on its businesses in crypto, consumer on-demand and social. "Overall, we believe the near-term picture for TWLO appears less clear, and investor skepticism around the mid/long-term margin framework is likely to weigh on shares until the company delivers consistent, material improvement," Lane wrote. "We remain believers in the inherent value and differentiation of Twilio's platform, but are looking for signs of more durable growth," Lane added. —CNBC's Michael Bloom contributed to this report.