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Take Profits in Twilio? Shares Hit Key Extension on Earnings

Twilio is hitting all-time highs after reporting earnings. But is it running out of steam? Let's check the charts on this big winner.

Twilio  (TWLO)  was one of the few stocks boasting nice gains on Thursday, up 11% at one point.

The move came after better-than-expected fourth-quarter earnings and revenue. Revenue of $548.1 million grew 65.5% year over year and easily beat expectations by more than $93 million.

It helps that Twilio’s first-quarter revenue guidance came in ahead of expectations too, with management forecasting a range of $526 million to $536 million vs. analysts’ expectations of $487.2 million.

With shares still up about 8% on the day, the price action bodes well for bulls as the Nasdaq is down more than 1%. The earnings report also resulted in two analysts raising their price targets to $550.

With that being said, the stock isn’t exactly flying under the radar.

Trading at almost 30 times forward revenue estimates (which may very well be too conservative based on first-quarter estimates) and with shares up almost 600% from the March lows, this stock may need to rest at some point.

Trading Twilio

Daily chart of Twilio stock.

Daily chart of Twilio stock.

The market has had some weakness lately. Not enough to hit the panic button, but enough for traders to consider taking some profits and raising their stop-loss levels.

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Obviously, we want to let our winners run a bit and Twilio is certainly one of those winners. But it’s come a long way. For instance, in September traders had almost an entire month to pick at Twilio around $225.

Is it now worth double the price it was trading at two quarters ago?

That’s not for us to determine (plus our opinion doesn’t really matter). I only point it out for some perspective as shares briefly eclipsed $450 on Thursday, which is roughly the 161.8% extension of the January range.

While not a seemingly significant range to measure, keep in mind the stock fell almost 20% in just three trading days.

If the bulls step up, they can maintain these post-earnings gains and hopefully reclaim $450. Above the post-earnings high (currently at $457.30) and the two-times range extension near $480 is on the table.

If the stock can clear that mark, then $500-plus is possible.

Should shares fade instead, bulls have to be looking for a gap-fill down toward $420. Nearby it will also find the 10-day moving average.

If we get a notable pullback in the market, perhaps Twilio breaks below $400 support and tests the 50-day moving average and its VWAP measure.

I don’t expect this at the moment, but if Twilio really falls hard the 100-day moving average will be on the table, which has been strong support for a while now.