Bank of America double downgrades Twilio, slashes price target as demand sours

Twilio could be in trouble as signs point to less spending from clients, according to Bank of America. Analyst Michael J. Funk double downgraded the company, which makes programmable tools enabling businesses to send and receive calls and text messages, to underperform from buy. The analyst also slashed his price target on the stock to $85 from $175. That’s still a 13% upside, but is down from the previously expected 133% increase. The stock fell 4% in premarket trading. Funk pointed to survey data showing more than half of respondents plan to spend the same of less on the communications platform next year. That adds to challenges expected as increased competition will create add to pricing pressure and revenue forecasts are at risk. “Usage/spending intentions with TWLO are slipping as 52% of respondents expect to spend less on the platform in 2023 compared to 2022,” he said. “Our survey supports a more cautious view of TWLO’s usage-based model in the short term as enterprises reduce discretionary spending or seek lower cost alternatives.” That resulted in Funk lowering the company’s 2023 revenue estimate to an increase of 25.1% from 30% and to 26.1% from 30% in 2024. The data also showed that 26% of total respondents said they would spend between 25% and 75% less. Meanwhile, the majority said they planned to spend more in 2023 when asked the same question about competitors GitlLab, Atlassian and Hashicorp. Increased competition has also placed additional pressure on Twilio prices, he said. — CNBC’s Michael Bloom contributed to this report.