What Investors Need to Know About Changes to Twilio’s Risk Factors

Twilio Inc (TWLO) is a California-based cloud communications platform provider. It recently closed the acquisition of Zipwhip, which it describes as a leading provider of toll-free messaging in the U.S.

Don't Miss our Black Friday Offers:

Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

Let’s take a look at Twilio’s latest financial performance, next quarter outlook, and risk factors.

Twilio’s Q2 Financial Results

Revenue increased 67% year-over-year to $668.9 million. The company reported an adjusted loss per share of $0.11 compared to an adjusted profit per share of $0.09 in the same quarter last year. Twilio closed Q2 with 240,000 active customer accounts, up from 200,000 a year ago, and wrapped up the quarter with about $1.8 billion in cash.

Twilio CEO Jeff Lawson commented, “Companies across industries are adopting our platform to drive better, more personalized levels of customer engagement, and we remain convinced that we are in the midst of a massive shift that is driving a generational opportunity for Twilio.”

Twilio issued Q3 guidance calling for revenue of between $670 million and $680 million, suggesting growth of 50% – 52% year-over-year. The revenue estimate includes the Twilio Segment contribution but excludes contributions from the recently acquired Zipwhip. It expects a loss per share in the range of $0.17 – $0.14. (See Twilio stock charts on TipRanks).

Twilio’s Risk Factors

According to the new Tipranks Risk Factors tool, Twilio now carries a total of 69 risks, down from 74 previously. Finance and Corporate is the primary risk category, representing 33% of the total risks. Legal and Regulatory and the Ability to Sell are the next major risk categories at 17% each.

Since June 2021, Twilio has edited its risk profile to add five new risks and remove seven previous risks. The removed risks fall under Finance and Corporate, Production, and Legal and Regulatory. A removed risk under the Production category had warned about counterparty risks related to capped call transactions.

Most of the added risks fall under the Financial and Corporate category. The company says it closed Q2 with $1 billion in outstanding debt. It warns that its indebtedness could negatively affect its financial condition and mentions its limited ability to obtain future financing for capital expenditures and working capital.

In a newly added Legal and Regulatory risk, Twilio cautions about potentially adverse consequences to its operations and cash flow as a result of changes to U.S. and global tax legislation.

Twilio’s Finance and Corporate risk factor is at 33%, below the sector average of 38%. Twilio’s shares have gained about 12% since the beginning of 2021.

Analysts’ Take

Following Twilio’s Q2 report, RBC Capital analyst Rishi Jaluria reiterated a Buy rating on Twilio stock and raised the price target to $450 from $415. Jaluria’s new price target suggests 18.56% upside potential.

The analyst noted that Twilio’s Q2 revenue beat expectations, and the Q3 outlook is more upbeat than consensus estimates.

Consensus among analysts is a Strong Buy based on 21 Buys and 2 Holds. The average Twilio price target of $451.21 implies 18.88% upside potential to current levels.