2023-08-09 08:51:07 ET
Twilio ( NYSE: TWLO ) shares rose more than 6% in pre-market trading on Wednesday after the communications software company reported second-quarter results and guidance that caused some on Wall Street to say patience is still required.
J.P. Morgan analyst Mark Murphy, who has an overweight rating and $80 price target on Twilio ( TWLO ), said the 10% year-over-year organic revenue growth in the second-quarter shows stability, but there are signs the company's turnaround strategy requires investor patience, as evidenced by third-quarter guidance.
"Overall, while we continue to expect Twilio’s turnaround strategy to require patience, we believe that following a recent ~26% cumulative [reduction in workforce], the company is showing meaningful progress in per employee productivity (up ~30%+ per Q2 organic growth), while also demonstrating improving unit economics in the business with a material step-up in FCF generation," Murphy wrote in an investor note
Looking to the third-quarter, Twilio ( TWLO ) expects adjusted earnings to be between 33 and 37 cents per share, above the 30-cent estimate. However, revenues are forecast to fall short of the $1.02B estimate, coming in between $980M and $990M.
Bank of America analyst Michael Funk reiterated the firm's underweight rating and $55 price target after the results, citing the "disappointing" guidance and slowdown in operating leverage.
"We expect operating leverage to moderate in the coming quarters based on fully realizing expense reduction/RIF benefits, noted D&A price sensitivity amongst SMB customers and continued challenging competitive dynamics in the Communications segment," Funk wrote.
Morgan Stanley analyst Meta Marshall, who has an overweight rating and $75 price target on Twilio ( TWLO ), said the results were "clean" but it's still transitioning towards focusing on profitability.
"While still facing macro headwinds, we see a path to reacceleration as headwinds (organic and inorganic) subside, keeping us [overweight]," Marshall wrote.
More on Twilio
- Twilio Inc. Q2 2023 Earnings Call Transcript
- Twilio: Rapid Growth To Profitable Growth
- Twilio: Need To Watch How Nearest Quarters Will Unfold Before Investing
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Twilio gains but Wall Street says patience needed after Q2 results, guidance