The last three weeks have been very good for Twilio, the cloud communications service, which had its widely-praised IPO right at the tail end of June.
Debuting at $15 per share, it’s popped up as high as $44.80 on Wall Street’s excitement for the fact that Twilio’s financials show both rapid growth and strong technology. Even Mad Money’s Jim Cramer got in on the Twilio love-fest.
Today, though, the markets are hitting the brakes on Twilio’s rising share price — at the time of writing, it’s down almost 4.5% to $41.08 per share as the market starts to worry that Twilio is trading at too high a premium.
As Barron’s reports, analysts at Canaccord and Pacific Crest are starting to get more cautious about Twilio: Notably, Canaccord’s Richard Davis estimates that Twilio is trading at 12.1 times his projections for its 2017 revenue, which is far and above other comparable companies.
In short, both firms are concerned that Twilio’s ride to the top is unsustainable, and that it’s overpriced. Davis indicates that a more reasonable price would be in the high $30s, at which point his anxiety may subside.
But just to keep some perspective: A share price in that high-$30 range would still be more than twice its $15 IPO price. There’s no shame in a course correction when you’re still flying high.