Shares of Twilio fell 4.3% in extended trading on Tuesday despite reporting stronger-than-expected 2Q earnings results. The communication tool provider’s slowing customer expansion growth rate weighed on the stock.
Twilio (TWLO) said its dollar-based net expansion rate was 132% in 2Q, lower than the 143% reported in 1Q, and 141% in the year-ago quarter. According to Bloomberg, the slowing customer expansion growth rate represents a weakening corporate demand for communication tools.
Meanwhile, the company reported adjusted EPS of $0.09 in 2Q beating analysts’ expectations of a loss of $0.09. Revenues jumped 46% to $400.8 million and surpassed Street estimates of $368.2 million.
Rosenblatt Securities analyst Ryan Koontz increased TWLO’s price target to $255 (10% downside potential) from $235 and maintained a Hold rating. Koontz said, “our long-term positive outlook for the CPaaS [Communications Platform as a Service] segment remains bullish and we expect TWLO to benefit from minimal competition in the near-term. We increase our 2H20 and FY21 revenue estimates (by +3%) with earnings slightly lower due to gross margin adjustments.”
Currently, TWLO has a Strong Buy analyst consensus. The stock has surged nearly 189% year-to-date, so it is not surprising that the average price target of $242.37 implies downside potential of about 15%. (See TWLO stock analysis on TipRanks).