Shares of Twilio (TWLO) are sliding after the company reported quarterly results and warned of slowing business from its top client Uber. Following the news, Pacific Crest analyst Brent Bracelin downgraded the stock to Sector Weight, and several other Wall Street analysts lowered their price targets on the shares.

RESULTS, UBER UPDATE: Last night, Twilio reported first quarter losses per share of (4c) and revenue of $87.4M, both better than expected. For the second quarter, the company said it sees losses per share of (11c)-(10c) and revenue of $85.5M-$87.5M, with consensus estimates at (8c) and $87.8M, respectively. Additionally, Twilio sees 2017 losses per share of (30c)-(27c) and revenue of $356M-$362M, both below consensus of (16c) and $370M. During the company's earnings call, Twilio's executives warned of slowing business from its lead client Uber. "1Q17, Uber accounted for roughly 12% of total revenue, and... we expect their contribution to decline further this year. Uber continues to grow rapidly, but they are changing the way they utilize and consume communications services. [...] We believe that Uber will remain an important customer for us going forward, but their tremendous growth and the resulting magnitude of their communication spend has resulted in this change in approach."

MOVING TO THE SIDELINES: In a post-earnings research note, Pacific Crest's Bracelin downgraded Twilio to Sector Weight from Overweight based on the dislocation at Uber, revenue growth that could decelerate below 20% year over year before reaccelerating next year, planned investments that could widen operating losses above 2015 levels, and heightened competitive risks. The analyst noted that the one silver lining for Twilio is the fact that core revenue, excluding Uber and WhatsApp, accelerated slightly to 64% year over year last quarter and now accounts for 83% of sales. However, this might not be enough to offset all the competitive noise with a number of voice and messaging API alternatives that have surfaced in the last six months, he contended.

OTHER ANALYSTS CUT TARGETS, REMAIN BULLISH: While Canaccord analyst Richard Davis lowered his price target for Twilio to $33 from $40, citing the faster than expected deceleration of Uber, he told investors that it would be ill-advised to sell while others are aggressively selling, adding that he expects the company's shares to likely retrace. He reiterated a Buy rating on the stock. Meanwhile, his peer at JPMorgan told investors in a research note of his own that he believes investors are overlooking two important considerations, namely that the company's broader base of business grew at a 45%-50% annualized clip in the first quarter and the point that "Uber is an extreme outlier and unlikely to represent the risk profile of other customers." Analyst Mark Murphy lowered his price target on Twilio shares to $33 from $36, but kept an Overweight rating on the name. Commenting on Twilio's announcement, JMP Securities analyst Patrick Walravens said that while the Uber situation naturally raises concerns that the company's services are undifferentiated and easily replaced, these types of web-scale businesses are outliers and Twilio remains well-positioned for long-term, profitable growth. He trimmed his price target on the shares to $33 from $37 but reiterated an Outperform rating.

UBER CHANGES BENEFICIAL FOR VONAGE: In a research note this morning, Craig-Hallum analyst George Sutton told investors that he believes Twilio's "pain" is likely Vongage's (VG) Nexmo gain. Sutton noted that Vonage reports results next week and expects this Nexmo/Uber item will be a focus as will the growing evolution of its Amazon (AMZN) partnership. He reiterated a Buy rating and $10 price target on Vonage's shares.

PRICE ACTION: In morning trading, Twilio has dropped about 27%, or $9, to $24.92 per share. Meanwhile, Vonage shares have gained 1.5% to $6.86.