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Why Twilio Stock Fell Hard Today

What happened 

Shares of Twilio (NYSE:TWLO), a cloud-based communications platform, were falling today on no company-specific news. Instead, the stock is likely falling in sympathy with other tech stocks that are sliding today on concerns that there could be a conflict in Europe and rising interest rates in the U.S.

Twilio’s shares were down 9.5% as of 1:47 p.m. 

So what 

Tech stocks have been pretty erratic over the past few months as investors have adjusted their investment strategies in the wake of rising inflation, a potential conflict in Europe, and the likelihood that the Federal Reserve will raise interest rates as soon as next month.

A woman sitting at a desk.

Image source: Getty Images.

With inflation now at a 40-year high, it’s become increasingly likely that the Federal Reserve could raise interest rates multiple times throughout 2022. The earliest rate hike could come later next month when the Fed has its next meeting. 

Higher interest rates mean that the cost of borrowing money for companies will be higher. That often causes companies to borrow less and, in turn, can stifle their growth. 

Fears about rising inflation and potential interest rate increases have helped push Twilio’s stock down by 45% over the past three months. 

Additionally, the potential for conflict between Ukraine and Russia has dragged down the broader market lately. The S&P 500 is down 1.3% and the tech-heavy Nasdaq Composite is down 1.9% today on those fears.

Now what 

Twilio reported its fourth-quarter financial results last week, with revenue that beat Wall Street’s expectations and earnings that were on par with analysts’ consensus estimate. 

Additionally, management expects sales to increase in the first quarter by 46% at the midpoint of guidance. Which means that while tech investors may be worried about macroeconomic concerns, Twilio investors may instead want to focus on the company’s long-term potential. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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