With the recent hard times both Facebook and Twitter shareholders have faced, it might be an odd time to discuss another technology company, Twilio (NASDAQ: TWLO).
I’ll be honest, up until a few days ago, I was unaware of who Twilio was. It was only after digging in to learn more about the company did I realize I use their services in many of the apps on my phone. And many other people do as well.
So when the stock price jumped the other day, I thought it was a good time to go into detail about this stock and help keep investors thoughts of making money in line.
In this post, I’ll walk you through who Twilio is, what they do, and if now is a smart time to buy the stock or not.
Who Is Twilio?
Twilio is a cloud communications platform that helps businesses add solutions to their web and mobile applications. I know that sounds like a mouthful, so here is an example of what Twilio does.
Think to a time when you are on a website and it asks if you want to receive text messages. You type in a series of numbers to a send to number and suddenly you begin to receive text messages back. You interact with these texts by simply replying yes, no, stop, etc.
The company behind this service is most likely Twilio. They offer many services, including:
- Voice and video: make and receive calls from within an app
- Messaging: send and receive global SMS and MMS messages within an app
- Authentication: allow for two factor authentication from within apps and online
By using Twilio APIs, businesses can easily integrate these features into their product offerings. Before Twilio, it was cumbersome to use any of these, let alone all of them.
Twilio By The Numbers
Twilio stock went public in 2016 and being a shareholder since then has been a nauseating ride. The stock debuted at $15 a share, quickly spiked to $70 a share, then fell back to $24 a share. Remember, this is over a two year period.
Now the stock is hot again as the company has been blowing out earnings. In fact, in their latest earnings release, revenue growth was up 54% and has been climbing by at least 40%.
They even reaffirmed guidance to the higher end of estimates for the next quarter.
The company has over 40,000 business partners and they continue to add more. In fact, the company recently announced it a new API for WhatsApp and Google Cloud Contact Center.
But while all this sounds great, does this make the stock a slam dunk? Or should you be hesitant to buy in at the current price levels?
Should You Be A Buyer Of Twilio Stock?
This isn’t a cut and dry answer. On the one hand, the company is killing it. They continue to quickly grow revenues and are far and away the best of breed in this space. But others are coming.
And in some cases, businesses are moving away from Twilio and creating their own APIs from within.
I often talk about how being the leader in a sector is a good thing, and with Twilio this is the case as well. It’s just that I can’t recommend the stock at this level.
The company has been firing on all cylinders and all signs point to this continuing. But at some point the growth will slow. And instead of the stock just dropping, it is going to fall hard.
The reason is because of exhuberance. Investors are in love with the pace of growth the stock is experiencing and this has caused the stock price to get ahead of itself.
When the growth slows or stalls, even for one quarter, the stock is going to get hit.
But what if you really want to invest in this stock? Then you have to set up stop loss orders. There is simply too much risk to the downside right now. Exposing yourself without a stop loss order is playing with fire.
At the end of the day, this stock is on fire right now. And with other technology stock leaders getting hit, investors are looking for a place to park their money. I am hesitant to recommend this stock at these price levels but if you need to invest in this stock, be smart about it.
Set up stop loss orders to protect your downside and stay up to date on what is happening with this company. Finally, be ready to pull the trigger and sell if bad news hits or take your profits if the stock pops even more.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.