Twilio Could Have More Downside and Here's Where It Could Land

Twilio is under pressure after disappointing profit guidance.
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Twilio  (TWLO) - Get Report was under pressure Thursday, falling 6% after the company disappointed investors with its outlook.

While its fourth-quarter results topped expectations, management’s forward outlook did not. It leaves investors in a tough place because growth remains quite strong for this company. That’s keeping investors from completely throwing in the towel. However, the suboptimal outlook has investors hesitant to buy the dip.

Earnings of 4 cents a share topped estimates 3 cents, while revenue jumped to $331.2 million, breezing past expectations by more than $18 million. Management’s full-year and next-quarter revenue outlook topped estimates, but both measures came up short when it came to earnings.

In short, consensus estimates were looking for slight profitability next quarter and for fiscal 2020. Management plans to forgo that profit for more revenue. And while that’s not necessarily a bad business decision, it does result in a negative development for the charts.

Let’s have a look at the technicals.

Trading Twilio Stock

Daily chart of Twilio stock.

Daily chart of Twilio stock.

The stock was red hot coming into the earnings report. Shares raced from $96.68 at the end of December, to a pre-earnings high of $133. That’s good for a 37.5% move, so it’s not as if bulls weren’t optimistic heading into the report.

Even after the stock’s post-earnings pullback, shares are still up more than 20% this year. But what now?

Like we said at the top, Twilio still has strong growth. That will keep investors from completely throwing the stock out. However, its disappointing profit guidance has certainly sapped momentum. From here, investors just need to keep it simple.

If Twilio can’t reclaim $122.50, then more downside could ensue. That’s as this level has played a significant role both recently and over the past year. Further, the 200-day moving average is at $120.88, while the 50% retracement for the one-year range is at $120.41.

In other words, this area is significant. If Twilio can’t reclaim it then more downside could ensue. Below Thursday’s low of day, the 100-day and 50-day moving averages are possible. This area may lure in buy-the-dip investors, as may uptrend support (blue line) should it fall that far.

If Twilio stock does reclaim the $122.50 mark, look to see if shares can fill the post-earnings gap up toward $127. Over that and $135 resistance is on the table. Above that and technically speaking, $150 is possible. 

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