TWLO
appears to have put a double bottom with stable 6 mo. support base between the high 20s to low 30s. The stock reversed last week and began an uptrend run. With decisively strong RSI, at highest level not seen since August 2016 it looks like $32-$35 can be achieved by the May 2 earnings release date. Since its HOT IPO runup in 6/2016 the company built a strong cult of short sellers (A la TSLA & SNAP) which remains at a very high % of float. Going forward, how high the stock can appreciate will depend on various factors, as follows:
1. May 2 revenue growth - The company historically has issued conservative guidance. In Q4 Analysts expected $TWLO to beat est. rev. of $74.1M by about $3 million. They ended up reporting $82M. In Q1 they guided between $82M to $84M in revenue. Based on past patterns, $89M to $92M wouldn't be unreasonable.
2. Gross Margins - Q4 Gross Margins was highest of 2016 at 58%. The company alluded to the possibility of lowering slightly Gross Margins to deter any new entrants to their domain until they conquer it. So I expect a 54% Gross Margins as a worst case scenario. Once they completely dominate the space they expect to increase Gross Margins to 60% +.
3. The Market - Depending on how the market behaves in the short term will determine how high the stock will appreciate post earnings. If the stars align we may see high $30s by mid-May.
4. Short Squeeze - Last but not least, the high short interest in TWLO was last recorded at 15,396,300 shares out of 49,536,200 float or 31% of the float and ~7 days to cover. If items 1 to 3 above play out as described, I expect a major stock squeeze that can send the stock soaring.
Good Luck!
