The cloud communication platform provider Twilio (NYSE:TWLO) disclosed plans to lay off about 17% of its workforce in a bid to control costs and improve its bottom-line numbers. The move will result in restructuring charges between $100 and $135 million, a majority of which are expected to be incurred in the first quarter of 2023.
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The most recent announcement would mark the company’s second attempt to reduce costs through headcount reduction. Earlier in September 2022, Twilio had eliminated about 11% of its employees.
Companies from all sectors have continued to announce layoff plans because of recession fears. Last week, Disney (DIS) said that it may eliminate about 7,000 employees, while Zoom (ZM) aims to cut 15% of its workforce. Furthermore, eBay (EBAY) is slashing its headcount by 4% as its performance continues to be impacted by challenging macro conditions.
Other Key Announcements
Alongside layoffs, Twilio announced plans to shutter some offices permanently. Also, the base salary of Twilio’s CEO, Jeff Lawson, has been reduced by 51% to $65,535 per year, effective March 1.
Moreover, the company’s board has approved the reorganization of its business into two units, i.e., Twilio Data & Applications and Twilio Communications. Twilio expects this move to help bolster efficiency and drive faster growth.
Regarding an update on upcoming Q4 results, Twilio anticipates that the company might exceed the guidance ranges provided in November 2022. The analysts expect Twilio to report a loss of $0.08 per share on February 15.
Is Twilio a Buy, Hold, or Sell?
Following the restructuring announcement, Jefferies analyst Samad Samana reiterated a Hold rating on the stock with a price target of $50. The analyst is of the opinion that the job cuts were needed as Twilio remains focused on delivering high-margin solutions and improving profitability.
Overall, TWLO stock has a Moderate Buy consensus rating based on four Buys and four Holds. The average price target of $69 implies 12.5% upside potential. Shares of the company have gained 16% over the past three months.
