Should I invest in Twilio shares after better than expected second-quarter results?

Twilio (NYSE: TWLO) shares have advanced more than 30% since May 13, and the current share price stands around $374. Twilio continues to expand its market share, the company reported better than expected second-quarter results last week, but even this doesn’t justify its current stock price.

Fundamental analysis: Twilio ended the second quarter with 240,000 active customer accounts

Twilio’s business continues to grow rapidly, and the company reported better than expected earnings results last Thursday. Total revenue has increased by 66.9% Y/Y to $668.9 million, while the Non-GAAP EPS was -$0.11 (beats by $0.02).

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Total revenue has increased above expectations ( +$69.8 million), and it is important to say that Twilio ended the second quarter with 240,000 active customer accounts compared to 200,000 active customer accounts as of June 30, 2020. The international business segment grew to 32% of total revenue while the company introduced two notable products, Segment Journeys and Twilio Live.

“Our strong momentum continued in the second quarter as our revenue growth accelerated at a run rate of more than $2.6 billion. 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,” said co-founder and CEO Jeff Lawson.

For the third quarter, Twilio expects total revenue to be in a range between $670 million – $680 million, while a non-GAAP loss per share should be between $0.14 – $0.17 (consensus is – $0.07 per share). Twilio remains positioned to deliver long-term elevated growth; still, shares of this company seem to be too expensive right now.

Twilio doesn’t operate with profit, TTM EBITDA is -$456 million, and with a $67 billion market capitalization, these company shares do not represent an opportunity for long-term investors. Twilio will always attract potential investors, but the stock’s current price does not reflect the company’s fundamental background.

Technical analysis: $350 represents the current support level

Technically looking, Twilio shares could advance above the current price levels in August 2021, but the risk/reward ratio is not good for long-term investors.

The critical support levels are $350 and $300; $400 and $450 represent the current resistance levels. If the price jumps above $400 resistance, it would be a signal to trade Twilio shares, and the next target could be around $430.

On the other side, if the price falls below $350, it would be a strong “sell” signal, and the next target could be around $330.

Summary

Twilio continues to increase active customer accounts; the company reported better than expected second-quarter results last week but announced that it expects a bigger loss than consensus in the third quarter. Technically looking, Twilio shares could advance above the current price levels this month, but the current price does not reflect the company’s fundamental background.

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