Twilio stock was the worst performer in the S&P 500 Friday as it flashed a potential bearish signal for investors.
Shares of the cloud communications company dropped 11% to $243.62 on Friday, below their current 50-day moving average of $253.97. The last time the stock dropped below that moving average this level was on Aug. 6, according to Dow Jones Market Data.
A slide below the 50-day moving average often means a stock's short-to-medium-term momentum has weakened and its recent uptrend may be shifting.
Investors were likely trying to lock in some profits Friday after the stock's big run-up. Twilio has risen nearly 90% this year as of the close of trading Thursday.
The company operates behind the scenes, allowing businesses to call, text, and email users, and powering actions ranging from ride-share arrival alerts to two-factor verification codes during logins.
Over the past month and a half, investors had snapped up the stock with high hopes about its recent entry into the S&P 500 and its role in powering autonomous artificial-intelligence agents, like Meta Platforms' Muse. That momentum drove a nearly 16% rally over the last six weeks.
Twilio officially joined the S&P 500 on Oct. 6, replacing Warner Bros. Discovery.
The gains, however, also have meant that expectations are extremely high, especially ahead of the company's fiscal-third-quarter earnings report on Oct. 29.
Last month, HSBC downgraded the stock to Reduce from Hold with a $211 price target, warning that investors may have gotten ahead of themselves in pricing in potential gains from Meta's Muse.
The firm cautioned that higher traffic volumes driven by Muse won't necessarily translate into meaningful profit growth for Twilio. The stock dropped nearly 8% when it got downgraded on Sept. 25.
Wall Street, however, still has an overall bullish stance on Twilio stock. Of the 34 analysts polled by FactSet, 76% recommend buying shares while 6% have a Sell rating. The remaining 18% rate the stock as Hold.
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