Shares of cloud platform company Twilio Inc (ticker: TWLO) fell more than 26 percent Wednesday after the company lowered its 2017 guidance. While a guidance cut is never good news for investors, Twilio’s problems can be traced to a single source: the ride-sharing service Uber.
Uber is one of Twilio’s largest customers. In the fourth quarter of 2016, Uber accounted for 17 percent of Twilio’s total revenue. In the first quarter of 2017, Twilio’s Uber revenue fell 25 percent sequentially.
In Twilio’s earnings call, CEO Jeff Lawson said Uber is changing its approach to communication services. “Previously, they’d used our platform to support most of their use cases in the majority of their operating territories. Now, they are optimizing by use case and by geography, resulting in a more active, multi-sourcing program,” Lawson said.
The bottom line for Twilio investors is that Uber’s share of Twilio’s total revenue dropped from 17 percent in the fourth quarter to only 12 percent in this year’s first quarter, and management expects that decline to continue throughout the remainder of 2017. As a result, Twilio management reduced 2017 revenue guidance by $9 million and non-GAAP income estimates by 12 cents per share.
Despite the guidance cut and huge market selloff, there are still plenty of reasons for long-term Twilio investors to be bullish. Even with the loss of Uber’s business, Twilio still topped consensus analyst expectations for revenue in the first quarter. TWLO reported earnings per share of 4 cents on revenue of $87.4 million compared to consensus estimates of 6 cents and $83.6 million, respectively. Even the lower revenue guidance still represents roughly 30 percent year-over-year growth.
Oppenheimer analyst Ittai Kidron says Twilio investors shouldn’t get too hung up on the Uber news.
“While the change is disappointing, we believe the risk of a similar impact from other customers is now minimal. Customer metrics validate Twilio’s strong traction and expansion, which should drive sustained growth,” Kidron says.
William Blair analyst Bhavan Suri says Twilio’s stock offers a compelling valuation at current levels.
“We believe…
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