Twilio Q2 2017 earnings pleasantly surprised Wall Street after investors and some analysts had nearly written off the company following its last earnings report in May. Twilio cut its outlook at that time because Uber, which has been going through multiple legal challenges this year, was one of its biggest customers.
Twilio management expected significant loss of business from Uber, but apparently, that didn’t matter much. When they cut their guidance for the year because of Uber’s troubles, Twilio bulls said that the sell-off was overdone.
Value Partners Asia ex-Japan Equity Fund has delivered a 60.7% return since its inception three years ago. In comparison, the MSCI All Counties Asia (ex-Japan) index has returned just 34% over the same period. The fund, which targets what it calls the best-in-class companies in "growth-like" areas of the market, such as information technology and Read More
Twilio Q2 2017 earnings smash estimates
Twilio reported a loss of 5 cents per share on $95.8 million in revenue, compared to the consensus estimates of 11 cents per share in losses on $86.2 million in revenue. Excluding Uber, the company’s revenue grew 64.5% year over year, compared to 62% in the first quarter. In a note following the Twilio Q2 2017 earnings release, Oppenheimer analyst Ittai Kidron and team reiterated their Outperform rating and $38 target price.
They said the company’s strong results support their belief that the problems at Uber are “an exception and transitory in nature. In fact, excluding Uber, Twilio is growing its customer base rapidly, as both expansion within current customers and the addition of new customers drove its revenue growth during the second quarter.
The Oppenheimer team also pointed out that Twilio’s guidance for the September quarter was “well ahead” of the consensus, and the company raised its outlook for the full year.
Concerns about Uber and WhatsApp
Kidron and team added that variable revenue bounced back, growing 23.2% sequentially, while average revenue per active customer grew 5.3% year over year excluding Uber and WhatsApp, where it was up 16.5%. On the downside, they noted a slight sequential decline in gross margin even though Twilio’s revenue grew.
WhatsApp revenue fell again, declining 19.6% year over year, while Uber revenue declined 17.7% sequentially. They warned that bother Uber and WhatsApp are still “large risks of sudden drop-off” and that voice and text are still the main revenue contributors. They feel that Twilio must diversify its product portfolio, although they see the pieces in place to do this. The company has added some products with higher average selling prices, such as Proxy and TaskRouter, and higher margins, like Notify, Authy and IP Message.
KeyBanc analyst Brent Bracelin and team maintained their Sector Weight rating following Twilio Q2 2017 earnings. They believe the strong results should calm investor nerves about competitive uncertainty but warned that the stock could remain volatile in the second half of the year.
They think investors will remain somewhat concerned because Uber and WhatsApp still make up about 14% of revenue combined. The company did add 2,735 more customers during the second quarter, however, ending with 43,431 active users.
The day after Twilio Q2 2017 earnings were released, the company’s stock soared by as much as 11.23% to $33.96 during regular trading hours.