Twilio (NYSE: TWLO) has seen its stock fall by more than 20% in the past year and it is currently, nowhere near its yearly high of $101.93. The customer engagement platform has been hammered in the past year due to multiple factors.
In Q1, while Twilio reported earnings that beat analysts’ expectations, the soft Q2 outlook left investors disappointed. The company has forecasted Q2 revenues between $980 million and $990 million, well below analysts’ expectations of $1.05 billion. Meanwhile, earnings per share were projected at $0.27 to $0.31, in line with analyst consensus figures of $0.29 per share.
The softer-than-expected Q2 outlook has been a result of “continued headwinds as we built the sales capacity of our data and apps business and doing that in a very tough macro environment as well,” according to the company’s management.
However, Twilio shares have jumped in the past month, up by more than 30% as activist investor, Legion Partners has reportedly urged the management to consider changes to the Board and other strategic options, including divestitures.
This activist interest in the company comes at a time when the company’s CEO and co-founder Jeff Lawson is set to lose his supervoting power (with a voting stake of around 22%) soon. The loss of the CEO’s supervoting power could make the company vulnerable to pressure from stockholders.
In a bid to get its strategic priorities right, earlier this month, the company sold off its multi-channel communication solutions business, ValueFirst Digital Media Private business to India-based communications platform provider Tanla for an undisclosed amount.
Wall Street’s View of Twilio
Interestingly, top-rated Oppenheimer analyst Ittai Kidron reiterated a Buy on the stock following the interest from Legion. The analyst commented that with the loss of supervoting power of Jeff Lawson, the CEO could see his voting control decline to around 3%.
Kidron pointed out that Legion Partners own roughly 2% of the company’s stock and its shares are currently trading at 84% of their peak value in February 2021 and around 2.1x EV-to-NTM (Enterprise Value-to-Next 12 months) sales.
The analyst added, “In response to the faltering stock, management made several changes over the last few months (layoffs, realignment of divisions, buybacks, etc.), but this provided a less than stellar recovery in the stock, and gave investors a reason to suggest incremental changes. Net, the involvement of Legion Partners supports our view that pressure on Twilio management will increase as super-voting rights expire [soon].”
Besides Kidron, other analysts are cautiously optimistic about TWLO stock with a Moderate Buy consensus rating based on 10 Buys, 12 Holds, and one Sell.