Twilio Earnings: Good Quarter, but Growth Expected To Remain Depressed Near-Term

Narrow-moat Twilio reported solid results with good revenue and strong profitability. However, guidance for the second quarter, while only slightly below our model on profitability, was materially below on revenue. Macro pressures are hurting more than anticipated, while the new sales team for data and applications is not fully ramped, and the disposition of the Internet of Things business is an incremental modest headwind. On the positive side, recent restructuring actions are already bearing fruit, as profitability was strong, and large deals are still being won. We are significantly reducing our growth estimates throughout our model, and as a result, are cutting our fair value estimate to $56 per share, from $95 previously. We think the stock remains a work in progress with the timing of growth acceleration a moving target, and we therefore prefer our wide-moat names currently.