Big Downgrade For Twilio: Analysts Cut Price Target Citing 'Intense Competition'

Bank of America Corp BAC Global Research downgraded shares of software company Twilio Inc TWLO to a sell equivalent Wednesday citing concerns to its revenue forecast amid increased competition.

What to know: Analyst Michael J. Funk downgraded Twilio to Underperform from Buy and lowered its price target from $175 to $85.

Bank of America is concerned that the time spent by customers of Twilio, a B2B company that enables developers to create scalable and highly customizable contact centers for businesses across a variety of channels, is waning into 2023 as BofA ran a DevSecOps survey in which it found usage/spending intentions with Twilio are slipping as 52% of respondents expect to spend less on the platform in 2023 compared to 2022.

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With that, BofA says, “there is downside risk to FY23 consensus revenue, which has not kept pace with the deteriorating economic environment. FY23 consensus revenue has fallen just
-1.8% over the last six months, which does not fully reflect macroeconomic risks to TLWO’s usage-based model, in our view. We have lowered our FY23 revenue forecast from $4,930mn to $4,743mn, which is now 3% below consensus.”

The analysts say the concerns with consensus revenues grew after speaking with Twilio’s key partners. Through their research, partner feedback suggests that competitive pricing pressure may be intensifying as Twilio is currently priced at a premium and while the appetite for CPaaS adoption is strong, though usage/spending is trending lower.

Final word: “We believe a discount is justified based TWLO’s lower expected usage, margin pressure, intensifying competition, and risk to consensus revenue estimates,” the analysts wrote to investors in a note Wednesday.

Price action: Shares of Twilio are trading 7.14% lower to $69.72. The stock has a 52-week high of $313.01 and a 52-week low of $63.27.
Be sure to check out Twilio's quote page. 
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