Shares of cloud communications infrastructure company Twilio (NYSE:TWLO) jumped 7.9% in the morning session after the company disclosed that co-founder Jeff Lawson is stepping down as CEO and from the Board. Khozema Shipchandler is replacing Lawson while Jeff Epstein is assuming the role as Chair of the Board. Before assuming the CEO role, Shipchandler was formerly President of Twilio and has over 25 years of experience, including spending over two decades at General Electric. In addition, Twilio expressed optimism about its fourth-quarter 2023 financial performance under Shipchandler's leadership, expecting revenue and non-GAAP income from operations to surpass previously provided guidance ranges.
This announcement comes as Twilio deals with two activist investors--Anson Funds and Legion Partners--who have been pushing for significant changes at the company. Specifically, both firms are pushing for the company to sell itself or to divest its data & applications business. "As we've previously discussed with Twilio's Board of Directors, we believe Founder Jeff Lawson's departure from the company would be a step in the right direction and are pleased with the leadership change announced today...That said, we believe that more actions are needed to maximize value for shareholders. We look forward to continuing to engage with Twilio's Board and management team going forward.", said Anson Funds portfolio manager Sagar Gupta.
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What is the market telling us:
Twilio's shares are very volatile and over the last year have had 22 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago, when the company dropped 5.6% as the Nasdaq and S&P 500 continued to retreat while the Dow rose slightly. Interest rates rebounded a bit, and investors may be continuing to take profits after a strong calendar 2023. Other than that, we found nothing more specific for the broad move downward.
As a reminder, 2023 was a stellar year for the markets, with the S&P 500 surging by almost 25% and the NASDAQ Composite up over 40%. The final month of 2023 was notably strong, marked by a rally in equities and bonds. The prevailing theme for 2024 revolves around the narrative of slowing inflation. The Federal Reserve is attempting to orchestrate a soft landing scenario, where inflation comes under control without damaging the economy (in the form of higher unemployment and lower GDP growth, for example). This could hurt overall consumer demand and the markets. As it stands, the market expects a 75 basis points cut in rates throughout the year. Any change in this expectation or narrative could move markets.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
Twilio is up 3.2% since the beginning of the year, and at $73.39 per share it is trading close to its 52-week high of $77.85 from December 2023. Investors who bought $1,000 worth of Twilio's shares 5 years ago would now be looking at an investment worth $751.84.
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