Twilio Inc. (TWLO) shares opened sharply higher on Monday, breaking out from trendline resistance, before giving up ground later in the day. The move follows a sharp increase during Friday's session, when average call option volume sent shares higher and ahead of the company's earnings report scheduled for Feb. 12. The market appears confident that earnings will beat estimates, but expectations have also been on the rise.
Analysts have generally been bullish on the stock following the acquisition of SendGrid for approximately $3 billion. JMP Securities raised its price target on Twilio stock from $89.00 to $120.00 per share, citing the SendGrid acquisition and the company's programmable wireless solution that "seems to be dominating" the electric lightweight vehicles sector. Baird analysts also increased their price target to $134.00 on Feb. 1, even after the stock's strong performance.
Twilio shares have generally risen following earnings over the past 10 quarters, although shares are currently more than 60% higher since the previous earnings release. According to Yahoo! Finance, analysts expect revenue of $185 million and earnings per share of four cents for the quarter.
From a technical standpoint, the stock broke out from trendline resistance in late January, fell back to the trendline earlier this month and rebounded higher over the past two sessions. The relative strength index (RSI) moved to overbought levels of 65.04, but the moving average convergence divergence (MACD) remains in a bullish uptrend. These indicators suggest that the stock could see some consolidation, but the intermediate-term trend remains bullish.
Traders should watch for consolidation near the support trendline at $110.00 over the coming sessions. If the stock rebounds higher, traders should watch for a move toward R1 resistance at $123.05 or R2 resistance at $134.79. If the stock breaks down from trendline support, traders could see a move down to the pivot point at $101.59 or the 50-day moving average at $96.37, although that scenario appears less likely to occur.
The author holds no position in the stock(s) mentioned except through passively managed index funds.