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Twilio's Guidance Cut An Uber Thing, Not Indicative Of Core Business

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Twilio's Guidance Cut An Uber Thing, Not Indicative Of Core Business

Twilio Inc (NYSE: TWLO) shares are sinking like a stone after the company lowered its 2017 guidance on Tuesday. The biggest blow to Twilio investors was the revelation that one of the company’s biggest clients, Uber, is branching out and shifting some of its business to competitors.

The news sent Twilio shares down more than 27 percent, but Oppenheimer analyst Ittai Kidron urges investors not to read too much into declining Uber business.

“While the change in the Uber relationship is disappointing and a major growth challenge in 2017, we believe Uber is the exception rather than the rule,” Kidron explains.

“Ex-Uber, Twilio continues to experience impressive growth in new customer additions, size of new customers and usage within existing customers (net dollar expansions).”

Related Link: Twilio's New 'Unexpected' Relationship With Uber

Uber and Facebook Inc (NASDAQ: FB)’s WhatsApp are Twilio’s two largest customers. However, Kidron reports that the remainder of Twilio’s customers each account for no more than 2 percent of the company’s total revenue, limiting the risk of another Uber-like event in the future.

Twilio bulls can take comfort in the fact that the company still managed to exceed consensus analyst revenue estimates in Q1. In addition, Twilio reported a 42.1 percent year-over-year increase in active customer accounts, a 3.6 percent gain in average revenue per customer (excluding Uber and WhatsApp), a 3.7 percent increase in gross margin and a 61.8 percent increase in base revenue.

Kidron admits the Uber news stings and lowered Oppenheimer’s price target for the stock from $50 to $38. However, the firm maintains a bullish outlook and an Outperform rating on Twilio.

Latest Ratings for TWLO

DateFirmActionFromTo
Jul 2020KeyBancMaintainsOverweight
Jun 2020Northland Capital MarketsMaintainsOutperform
Jun 2020Piper SandlerUpgradesNeutralOverweight

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