Twilio Stock (NYSE:TWLO)
Though a new week has begun, the stock market continues to show similar downward trends as the previous week. On the other hand, one stock has defied the market and is showing green this afternoon. Twilio (NYSE:TWLO), a cloud-based communications platform provider, are up by a healthy 2% as of 12:55 PM ET.
What’s the Reason?
A statement from the investment bank released this morning suggested they were leaning toward lowering Twilio shares. Thus this news comes as something of a surprise. Due to the company’s impending short-term challenges, Piper Sandler has reduced its price estimate for Twilio stock by $9 to $113 per share. However, rating tracker The Fly reports that the analyst kept the stock’s overweight rating.
Why is the Twilio stock going up if the price target was lowered?
If you haven’t heard, Twilio stock is trading at a discount of more than 60% from its IPO price of $70. It’s possible that Piper’s note today won’t be seen as “positive” by investors. However, the analyst’s forecast of a 63% increase in Twilio share price over the next year still seems like fantastic news.
Piper notes that Twilio (NYSE:TWLO) is a significant player in the communications platform as a service industry. As Twilio (NYSE:TWLO) customers reduce their marketing budgets, this “over-exposure to message” could weigh on the Twilio stock shortly. But once the economy recovers and advertising spending rises again, the company’s dominant market dominance in messaging could assist it in outperforming.
What’s Next?
However, you may need to be patient before that occurs.
Twilio (NYSE:TWLO) was momentarily free-cash-flow positive in 2020, right in the middle of the pandemic. However, the company has been burning cash again since then. This trend has only accelerated as 2020 turned into 2021 and 2022. Twilio (NYSE:TWLO) has accumulated more than $209 million in negative free cash flow over the past 12 months. There are almost $1 billion in losses when using GAAP as the accounting standard.
However, experts predict that free cash flow will be positive sometime in 2019. Conversely, as far as the income statement is concerned, nothing but losses lie ahead (or as far out as analysts are willing to venture a guess, which is to say, through 2024).
Even if Twilio’s (NYSE:TWLO) revenues are predicted to increase by 36% year over year in 2022. It’s unclear why Piper Sandler is so bullish on the stock, given the current recessionary fears in the market and the lack of consistent earnings. Investors appear to be drawn to Twilio stock today because of projections for a “63%” share price increase. However, I anticipate this interest will shortly wane as people understand the company is still far from becoming profitable.
Featured Image- Megapixl @ Designer491
Author Shariq Khan 
