Twilio's trajectory tells us more about markets than it does about VoIP
Twilio is now some 60% of it's all-time high. This is not news, and here's why.
When it comes to investment, charting the course of any given IPO is similar to navigating a submarine through endless murky depths. Sometimes the ping of a radar blip can mean a successful target but, more often than not, that same blip is no more than just a big, fat, harmless manatee. Or something.
And so it was throughout 2016 when analysts were having a hard time predicting the day-to-day gyrations of Californian-based cloud communications company, Twilio. Arguably the darling IPO of a thin year, Twilio's debut on the stock market back in June saw it's price soar a staggering 90% during their first day of trading.
But, despite all the initial exuberance which saw saw Twilio topping out at $68.97/share in September, it then crunched in to reverse gear causing no small measure of selling pressure and confusion. Twilio quickly responded by prematurely announcing third quarter projections in order to calm investors' nerves. But, still some questions remain; why the instability? And what could that instability mean for the industry in 2017?
Investing by headlines
It could be argued that the main culprit when it comes to identifying the cause of any given stock's volatility is firmly rooted in media coverage of analysts' latest scribblings.
For example, when the partnership between Twilio and Amazon Web Service (AWS) – the $13 billion computing arm of Amazon (giving Twilio access to AWS's vast base of customers - reason enough for investors to collectively start salivating) – was announced back in July, shares went up over 15%.
Furthermore, that excitement hit fever pitch in December when news broke of the deepening bromance between Twilio and Amazon, and their joint interest in voice messaging, causing Twilio's stock to jump a further 1.7% on the day of the announcement.
However, the plot thickens because, despite a lack of any negative Twilio-related stories during the final week of 2016, prices were pegged back by some 10.46%. Welcome to the roller-coaster!
A possible cause of the drop may relate to the fact that the 'lock-up' period - the restrictions on selling stocks of recent IPOs – was lifted on December 20th. This may have tempted certain investors to cash out a touch early, but again, it might just have been the news of the drop alone that triggered the fluctuation.
Still, despite a rocky year, there are plenty of reasons why 2017 looks good for Twilio, and by extension, the entire cloud communications industry as a whole.
Reasons to be cheerful
Even if the waters were decidedly choppy for Twilio at times, the focus placed on the potential market strength of VoIP makes it exciting for everyone in the industry. The site Telecom Reseller places VoIP alongside biotechnology and web-based business as one of the top performing sectors of the decade, esteemed at $82.7 billion as of the beginning of the year.
Growing from strength to strength in a vast number of established and emerging real-world applications, VoIP is set to go absolutely stratospheric with the appearance of 5G in the years ahead - potentially supporting real-time VR and autonomous cars, creating up to 22 million jobs and generating $3.5 trillion in revenue. It's difficult to not get excited.
Sure as eggs is eggs and bulls are wont to go nuts in china shops, market analysts are genetically-programed to get way ahead of themselves in 2017, fuelling ever more price-sensitive clickbait and headlines. Let's not forget, however, that, in the business world, the rearview mirror is always clearer than the windshield.
That rearview mirror, in all probability, will show that Twilio is still a startup and while Twilio CEO, Jeff Lawson, was repeating his "focus on your customers" mantra, a few day traders got burned along the way. Didn't they know what they were getting in to?
Note: This article is published as "fair-comment" and does not constitute investment advice of any kind.