Twilio's Potential Remains Vast, But Is Now The Right Time To Invest?

Twilio Inc TWLO, one of the hottest IPOs of 2016, has seen its stock fall from its peak north of $70 per share in 2016 to its current level of near $25 per share. Most recently, Twilio's stock plummeted 30 percent in early May in reaction to a concerning earnings report and cautious guidance including lower sales from its most notable and visible clients, Uber.

The question now many investors are asking is if the stock is attractive at its current beaten up levels. Analysts at Argus doesn't necessarily think so.

Justification To Stay At Hold

Argus' Jim Kelleher maintains a Hold rating on Twilio's stock on Tuesday. The analyst acknowledged that he has a "favorable" view of the company's business prospects but investors shouldn't be "bottom fishing" as further downside could be seen in the stock.

Kelleher explained that the loss of Uber as an exclusive client implies the company is "navigating a down-shift by a key customer" and will dampen its growth outlook in 2017.

While the company argues that Uber's decision is an outlier this doesn't necessarily ease investor concerns that other customers will no longer exclusively use Twilio's products and services. As such, the company is "likely" to post losses for most quarters through the end of next year.

Bottom line, Twilio's long-term success depends on its ability to diversify its customer base, but at the end of the day, Twilio's lack of profitability and short public history is prompting the analyst to remain on the sidelines for the time being.

At time of publication, shares of Twilio were up 3.91 percent at $25.25.

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