Why The Trade Recommendation On Twilio?
Major Catalysts for This Trade.....
1. Past Earnings Report.....
fiscal 2020 financial performance was quite encouraging. Revenue jumped 55%
year over year to $1.76 billion. However, the company's GAAP loss from
operations increased from $369.8 million in the prior year to $492.9 million in
2020, mainly due to increased operating expenses and fees to network providers.
But the operating expenses grew by 44% year over year -- which is slower than
the revenue growth rate. In fact, the company's fiscal 2020 non-GAAP income
from operations was $35.7 million, a stark improvement from a loss of $1.8
million in 2019.
is inching closer to becoming a profitable organization. Hence, it can continue
to soar much higher in the coming quarters.
guidance for the current quarter indicates that it is on track to sustain a
terrific pace of growth. The company expects top-line growth of 45.5% in the
current quarter after finishing fiscal 2020 with a revenue increase of 55%.
Also, it is worth noting that it had originally expected 30% to 31% revenue
growth for 2020, and it ended up blasting past those expectations due to the
tailwinds created by the pandemic.
won't be surprising to see Twilio exceed its own expectations once again in
2021 as more companies make the switch to cloud-based contact centers.
According to Twilio's 2021 state of consumer engagement report, 95% of the
2,500 enterprise decision-makers surveyed expect to either maintain or increase
their investment in customer engagement, and 87% believe that digital
engagement will play an important role in their business.
Digital Transformation Acceleration.....
of the businesses Twilio surveyed said that the COVID-19 pandemic had led them
to accelerate their shift to the cloud. Twilio anticipates this digital
transformation will continue. It points out that the forecast that annual
investments in digital transformation will double by 2023 to $2.3 trillion and
account for over half of information technology spending. As such, it won't be
surprising to see more call center seats move to the cloud.
has estimated that only 17% of the 15 million contact center seats were in the
cloud before the pandemic. That proportion is expected to jump to 50% by 2025,
setting the stage for the company to sustain its high rate of growth for years
has been diversifying into higher-margin businesses with the help of
acquisitions that should help support long-term margin expansion. The recent
purchase of Segment, for instance, will support cross-selling opportunities at
Twilio and expand the company's presence into the fast-growing customer data
Analysts estimate that Twilio's revenues will grow by more than 30%
annually over the next couple of years. That trend could continue over a longer
period as contact centers move to the cloud.
Jefferies analyst Samad Samana initiated coverage of Twilio with a Buy
rating and $451 price target.
said Twilio has been successfully disrupting the communication space for
several years now. He said Twilio should be able to maintain impressive growth
numbers even as the business scales up.
2016, Twilio has generated about 60% compound annual revenue growth, and Samana
said the company should continue to grow at above a 30% annual rate through at
focus on developers differentiates the company from its high-tech peers, Samana
said. In addition, the company has been focusing more on landing large
customers and working more closely with Deloitte and other partners.
was modestly profitable in 2020, but Samana said that profitability will
increase significantly over time as the company dials back its investments and
adds more high-margin revenue streams. Twilio’s long-term gross margin target
is above 60%.
carries a ~45% GM, but Voice, Email and App Services are all well above 70%,”
Samana wrote in the note.
a valuation perspective, Twilio shares are trading roughly in-line with its
high-growth tech stock peers. However, Samana said Twilio deserves to trade at
a premium valuation to other growth stocks because of its dominant positioning
in a nascent growth market.
Several other analysts have also commented on the company.....
- William Blair restated an "outperform" rating on shares of
Twilio in a research note on Thursday, February 18th.
- Northland Securities boosted their target price on Twilio from $390.00
to $500.00 in a research note on Thursday, February 18th.
- Stifel Nicolaus assumed coverage on Twilio in a research note on
Wednesday, January 13th. They issued a "buy" rating and a $425.00
target price on the stock.
- KeyCorp boosted their target price on Twilio from $420.00 to $550.00 and
gave the company an "overweight" rating in a research note on
Thursday, February 25th.
- Finally, Canaccord Genuity boosted their target price on Twilio from
$385.00 to $510.00 and gave the company a "buy" rating in a research
note on Thursday, February 25th.
Two analysts have rated the stock with a hold rating and twenty-two have
issued a buy rating to the company. The company presently has a consensus
rating of "Buy" and an average price target of $442.36.
Twilio's stock price declines in recent weeks offer a better opportunity
to buy options of a company that appears primed for growth.
remains the leader in the communication platform as a service (CPaaS) market,
helping leading companies communicate with their customers. As companies and
consumers become more digitally native, the need to have an intuitive and
sophisticated software communication platform will become essential.
recent acquisition of Segment, Twilio is evolving from a pure software
communications company into a customer experience company. The acquisition will
help Twilio's customers be able to leverage AI and data analytics in order to
better serve their end customers.
company's significant investments have paid dividends to revenue growth and
dollar-based net expansion.
number of customers who use Twilio's platform has continued to expand. During
the most recent quarter, the company reported 221k customers, up significantly
from the 64k customers at the end of 2018.
already laid out their path to profitability. With the company investing into
their future growth opportunities, they are gaining scale and widespread
customer adoption which will lead to higher levels of profitability in the
company's significant revenue growth opportunities via recent acquisitions and
investments, as well as continued product and geographic expansion, the company
is a winner.
Twilio Continue To Provide Profit?
We Recommend Another Trade On Twilio?
What Other Trades Are We
Do You Wish To Be Part Of This
For answers, join us here at Weekly Options USA, and get
the full details on the next trade.