With Twilio Stock Clearly In A Bubble, Should Investors Sell?
It’s been an exceedingly good year for software-as-a-service, or SaaS, stocks. And Twilio (NYSE:TWLO) has been one of the biggest winners even within that select group. TWLO stock is up 54% so far in 2019, extending its 12 months to more than 140%.
While anyone owning TWLO stock so far has enjoyed fantastic results, this will soon end. The company’s valuation is getting out of hand, and the business fundamentals simply aren’t there to justify the euphoria. That said, Twilio stock may have one last push higher before it rolls over. Here’s a closer look.
The article points out cash flow isn’t so good, company is still losing money and projections are for only a small profit next year, and that the price to sales ratio is too high, which, You can justify it on a comparable basis right now considering Twilio’s 30% revenue growth rate. But if and when that revenue growth rate sinks, investors would take Twilio’s stock valuation way down with it.
“If and when” is hardly a compelling reason to sell now. And, isn’t revenue growth rate one of Saul’s key metrics?
The article does mention a couple other stocks we discuss, as well:
It is one thing to pay through-the-nose valuations for something like Zoom Video (NASDAQ:ZM) or Alteryx (NYSE:AYX). Zoom sells cloud video solutions. That’s a great place to be in a world where streaming bandwidth usage is going to the moon. Similarly, Alteryx has a leading platform for deep data analysis. The big data revolution is still in the early innings. But Twilio doesn’t have anything like that sort of runway to its core business.
Anyway, thought this was of interest as a slightly better “overvalued” argument. Not compelling to me at this time, though.