• Twilio (TWLO) has surface-level appeal from a revenue-growth standpoint
• On the other hand, the company isn’t profitable, and is only digging a deeper financial hole for itself
• Investors should consider just avoiding Twilio altogether, even if they feel strongly about the future of cloud-based digital communications

At first glance, cloud-communications and software-security firm Twilio (NYSE:TWLO) might seem like a worthy addition to a tech-focused portfolio. Yet, TWLO stock isn’t the right asset to buy now as Twilio has major financial problems.

These problems might not be immediately apparent. In press releases, companies tend to strongly highlight the most positive fiscal data. This can cause some investors to ignore the negative data points.

In the case of Twilio, it’s perfectly fine to envision a robust future for cloud communications yet also avoid this company. As we’ll see, TWLO stock has devolved from a “growth stock” to a toxic asset.

Even beyond the technical aspects of the stock, there’s a lesson to learn when studying Twilio. In particular, informed investors should always look under the hood and read the fine print, instead of just browsing through a company’s positive top-line bullet points.

What’s Happening with TWLO Stock?

Suffice it to say that TWLO stock could be considered the poster child of growth stocks gone wrong. Anyone who bought the stock above $430 in early 2021 and held onto it, is holding a very heavy bag today.

Bear in mind, early 2021 was a time of rampant speculation, not only on meme stocks but on growth stocks in general. At the time, much like in early 2000, it felt like the tech-focused high flyers would just keep flying higher.

Of course, it’s easy to see in hindsight that some of these stocks would come crashing down sooner or later. Remember, the stock market is driven by sentiment in the short term, but stocks representing consistently unprofitable companies don’t just go up forever.

In any case, TWLO stock has fallen far from $300+, and it currently threatening to break below $100. Getting into the double-digits would deal a psychological blow to the shareholders, and there are no reliable support levels to be found below $100.

The Ugly Truth

Frankly, it’s challenging to place a value on Twilio. The company doesn’t have a price-to-earnings (P/E) ratio since it has no earnings. Don’t expect the company to mention this in any press releases. Informed investors always have to dig deeper and dredge up the negative data points on their own, it seems.

If you only glance at the top of Twilio’s press release covering 2021’s fourth quarter and full-year 2021, you might get the wrong impression. The world “revenue” is used over and over, as Twilio’s revenue growth is the primary positive aspect of the results.

Indeed, there’s no denying that Twilio recorded year-over-year revenue growth in Q4 2021 as well as full-year 2021. Those are just the top-line results, though. Really, the bottom-line results are what prospective investors should focus on.

To get the full fiscal picture, you’ll want to read Twilio’s Form 10-K carefully. In it, the company admits, “We have a history of losses and may not achieve or sustain profitability in the future.”

That statement almost screams to investors, “Run for the hills!” The “history of losses” admission is followed up by this series of unsettling stats:

“We have incurred net losses in each year since our inception, including net losses of $949.9 million, $491.0 million and $307.1 million in the years ended December 31, 2021, 2020 and 2019, respectively. We had an accumulated deficit of $2.1 billion as of December 31, 2021.”

Here, the ugly truth comes to light. Despite the company’s revenue growth, Twilio hasn’t been able to cover its expenses. Indeed, the financial hole has only deepened, with 2021 showing nearly double the net loss of 2020.

What You Can Do Now

Right now, you don’t have to do anything if you’re considering buying TWLO stock. It’s perfectly fine to stay on the sidelines.

You can also read through the fine print in Twilio’s financial documents – a good habit for every investor. Surface-level appeal can only get a company so far, and without profitability, the bull case for Twilio just isn’t there.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.