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Twilio (TWLO) Q4 Earnings: What's in Store for the Stock?

Zacks Equity Research

Twilio Inc. TWLO is slated to release fourth-quarter 2018 results on Feb 12.

Notably, the company boasts an encouraging record of earnings surprises in the trailing four reported quarters, the average being 123.22%.

In the third quarter, the company delivered non-GAAP earnings of 7 cents per share, which beat the Zacks Consensus Estimate of 2 cents. The company had incurred loss of 8 cents in the year-ago quarter.

The company’s third-quarter revenues soared 68% year over year to $169 million and surpassed the Zacks Consensus Estimate of $151 million.

For third-quarter 2018, Twilio estimates revenues between $183 million and $185 million. Base revenues are anticipated in the range of $174-$175 million. Non-GAAP earnings are projected in the range of 3-4 cents per share.

The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $184.4 million, reflecting year-over-year growth of almost 60%. Moreover, the consensus mark for earnings has been steady at 4 cents per share over the past 60 days.

Factors at Play

Twilio is riding on solid growth in the company’s core voice and messaging products. A few Twilio Flex deals are lending a further impetus to the company’s Engagement Cloud strategy.

The company is not only benefiting from the robust expansion within its existing customers but also the first-time deals with new ones, attributable to the company’s steady focus on product introductions and its go-to-market sales strategy. The launch of Twilio Pay with Twilio Voice being PCI (Payment Card Industry) certified is a step in that direction.

With new products gaining more traction, dollar based net expansion rate, which was 145% in the last reported quarter, will continue to be a major revenue driver.

Acquisitions of companies like Ytica, which had a material impact on the top and the bottom line in the last reported quarter, are expected to remain accretive in the fourth quarter as well.

However, the company is exposed to significant international risk as it derives a significant portion of revenues from customers outside the United States. Adverse foreign currency fluctuations and macroeconomic perils therefore remain a key threat.

Also, intensifying competition in the communications market and the growing prevalence of in-app push notifications are major concerns. This apart, customer concentration is still a headwind.

What Our Model Says                                            

Our proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has maximum chances of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Twillio currently carries a Zacks Rank #1, which increases the predictive power of ESP. However, its Earnings ESP of 0.00% makes surprise prediction difficult.

Twilio Inc. Price and EPS Surprise

Twilio Inc. Price and EPS Surprise | Twilio Inc. Quote

Stocks to Consider

Here are some stocks that you may consider as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases:

Mercury Systems Inc MRCY has an Earnings ESP of +0.66% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here

GTT Communications, Inc. GTT has an Earnings ESP of +173.53% and a Zacks Rank #2.

Ciena Corporation CIEN has an Earnings ESP of +1.70% and a Zacks Rank of 2.

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Twilio Inc. (TWLO) : Free Stock Analysis Report
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