"Twilio Stock Clearly In A Bubble"

With Twilio Stock Clearly In A Bubble, Should Investors Sell?

https://finance.yahoo.com/news/twilio-stock-clearly-bubble-i…

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.

12 Likes

I will give 0 credit to this author on his opinion on TWLO. The author, Ian Bezek, has always been bearish on TWLO and published several negative articles on TWLO. Back in Jan. 2017, when TWLO stock priced dropped to $28 a piece, he was saying TWLO was not a good investment. Do you trust his opinion?

8 Likes

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.

I thought TWLO growth rate is higher than 30%.

How do you trust an author who doesn’t even bother to include the correct figures in their analysis?

P/S is NOT 12x
Revenue Growth is NOT 30%

P/E has NO PLACE in measuring a company who CLEARLY STATES its intention to deference profits to invest in growth

Please do your own research. Track your companies and know your numbers.

If you don’t care to do the research, invest in ETFs and Index funds. This isn’t for you.

16 Likes