Sometimes a "beat and raise" isn't enough to get Wall Street excited. Shares of Twilio Inc. (NYSE: TWLO) plunged 15.8% last week, taking a hit despite posting financial results that blew past its earlier targets and raising its outlook for all of 2017.
It wasn't a perfect report. There was continuing deceleration across a few key metrics. Twilio's loss also widened during the quarter, with its adjusted quarterly deficit doubling to $0.08 a share. The loss matched Wall Street's expectations, but it was the first time that Twilio's bottom-line results weren't better than what analysts were anticipating. Most of the "raise" in Twilio's upwardly revised full-year guidance was realized during the third quarter, leading some investors to wonder if the heartiest octane is now running out for the leading in-app communications provider.
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The long way down
Twilio stock was already moving lower ahead of the report. The shares have actually closed lower for eight consecutive trading days, shedding 20% of their value.
The third quarter was solid. Base revenue rose 43% to $92 million, well ahead of the 35% to 37% year-over-year growth that management was targeting for the period back in early August. Excluding the effect of the loss of the Uber account, base revenue would've soared 63%.
Twilio continues to make strides, making the most of the programmable communications cloud to give developers solutions for their in-app communication needs. From getting a ridesharing service's driver in touch with a customer to resetting a streaming platform's password to now even helping a medical-device maker more effectively monitor glucose levels, Twilio is becoming a big part of its growing base of clients.
Twilio boosted its full-year guidance, just as it has consistently done in its brief tenure as a publicly traded company. The rub is that most of the growth already happened during the third quarter. The fourth quarter's guidance is still higher than what was implied when Twilio offered a summertime glimpse into all of 2017, but it apparently wasn't enough for investors who were hoping for more out of the market darling.
Twilio now has 46,489 active customer accounts, 35% more than it did a year earlier. The dollar-based net expansion rate stands at 122%, a strong indicator that retention is strong. Both of those metrics have been decelerating, but it's a testament to Twilio's widening popularity that those numbers remain positive.
As with any growth stock, there will be challenges. Sometimes putting out a good quarter is not enough when the market has been hungry for a great one. The only certainty here is volatility: This is the third quarter in a row that Twilio shares have responded with a double-digit percentage move following earnings.
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