Case Study on Twilio (TWLO) with Nobias technology
Twilio (TWLO), a market darling during 2020 and 2021 when there was a lot of appetite for risk in the markets, has severely struggled throughout 2022 thus far. TWLO shares were trading for $103.15 at the end of 2019. Despite the COVID-19 pandemic, they experienced a massive rally during 2020, ending that year trading for $338.50.
This positive momentum continued into 2021, where the stock eventually hit highs in the $435 area. However, with investor sentiment turning sour on relatively high growth, speculative stocks, especially in the software-as-a-service (SaaS) space, TWLO has lost significant market capitalization over the last year or so.
Twilio shares are down 77.48% during the trailing twelve months. They’re down 67.62% on a year-to-date basis. The stock is currently trading for $84.92, hovering slightly above its recent 52-week lows of $77.21. The stock sold off by 13.51% on Friday, after posting its second quarter results. And yet, even with this negative momentum, the credible authors and analysts that the Nobias algorithm tracks maintain a clear “Bullish” bias for the stock.
TWLO Aug 2022
Harsh Chauhan, a Nobias 4-star rated author, recently published an article titled “Better Buy: Twilio vs. Zoom Video Communications” in which he provided a bullish outlook for TWLO shares. Chauhan described TWLO’s operations, stating, “Twilio has been helping its clients bring their physical contact centers into the cloud with the help of its application programming interfaces (APIs). The company plays a critical role in helping companies connect with their customers through different channels such as voice, messaging, video, and email, among others.” He continued, “For instance, Lyft uses Twilio's platform to enable interactions between its drivers and users, while Airbnb has automated messages between hosts and guests with Twilio's help to simplify the accommodation booking process.”
Chauhan highlighted the potential size and strength of TWLO’s addressable market, writing, “This communications platform-as-a-service (CPaaS) market in which Twilio operates is growing at a terrific pace. Juniper Research estimates that the global CPaaS market could hit $10 billion in revenue this year, and could be worth $34 billion by 2026 as more companies adopt APIs to bolster their customer interaction efforts.”
And, with regard to market share, Chauhan noted TWLO’s market leading position stating, “Given that Twilio was sitting on a 38% share of the global CPaaS market last year and it was well ahead of second-placed Vonage's share of 11.8%, it is easy to see why it is one of the best bets on this massive opportunity.”
Regarding future fundamental growth, Chauhan wrote, “Twilio seems to be pulling the right strings to capitalize on a huge end-market opportunity, which explains why analysts expect its bottom line to increase at a compound annual rate of 155% for the next five years.”
Ultimately, Chauhan named TWLO as the better pick (relative to Zoom shares), citing faster growth, a cheaper valuation, and a stronger competitive position. However, as Mike Robinson, a Nobias 5-star rated author cites, not everyone is quite as bullish on TWLO shares as Chauhan.
In a recent report, Robinson puts a spotlight on a bearish report from Barclays analyst Ryan MacWilliams, who downgraded TWLO shares from overweight to equal weight, reducing his price target from $175.00/share to $110.00/share.
Robinson wrote, “The analyst believes that Twilio’s core API enterprise doubtlessly faces challenges going ahead as a consequence of a slowing digital economic system. Furthermore, MacWilliams “had hoped to see higher progress with Phase/Have interaction at this level.”’
However, as Robinson notes, the analysts’ bearish outlook here is not necessarily set in stone. He said, “Nonetheless, the analyst says he could possibly be flawed if Twilio manages to speed up natural development in Q3. This might immediate traders to purchase Twillio inventory as shares would merely be “too low cost at 6x CY23 eV/gross revenue and doubtlessly 30%+ natural development.”’
TWLO reported its second quarter earnings this week, beating analyst consensus estimates on both the top and bottom lines. The company posted sales of $943.35 million, beating estimates by 22.38 million, representing 41% growth on a year-over-year basis. On an organic basis, Twilio’s y/y revenue growth was 33% during the quarter. TWLO’s non-GAAP earnings-per-share came in at -$0.11, beating analyst estimates by $0.09/share.
During Twilio’s Q2 report, Jeff Lawson, Twilio’s co-founder and CEO, said, “We closed a strong second quarter, delivering $943 million in revenue and 41% year-over-year growth, while also signing our largest Flex deal ever. Based on our results and what we’re currently seeing, we remain confident in our growth trajectory as our customers continue to turn to Twilio's Customer Engagement Platform to help build direct relationships with their customers. We are closely following the macroeconomic environment and are taking proactive steps that will enable us to remain laser focused on our customers and executing against our top priorities.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
In TWLO’s Q2 report the company highlighted its expanding customer base, stating: “More than 275,000 Active Customer Accounts as of June 30, 2022, compared to 240,000 Active Customer Accounts as of June 30, 2021.” The company also established guidance for the third quarter, highlighting expectations for $965m-$975m in sales, which would represent 30%-32% y/y growth. The company expects to see organic sales growth of 29%-30% during Q3.
Twilio doesn’t expect to turn a profit during Q3, either. The company is calling for a non-GAAP loss-per-share of -$0.43 to -$0.37 during the third quarter. It appears that Wall Street was displeased with Twilio’s quarterly results/Q3 guidance because TWLO shares sold off by 13.51% during Friday’s post-earnings trading session. However, at TWLO’s current price point, it appears that the credible authors/analysts that the Nobias algorithm tracks aren’t overly concerned about slowing growth and the lack of profits.
Looking at the credible analysts community that Nobias tracks (only individuals with 4 and 5-star Nobias ratings), 81% of recent articles published on Twilio have expressed a “Bullish” bias. Since Twilio’s second quarter report, we’ve already seen a slew of credible analysts lowering their price targets for TWLO shares, largely citing the company’s disappointing growth outlook. However, even with these price target reductions in mind, credible analysts are still calling for immense upside.
Right now, the average price target being applied to TWLO shares by the credible Wall Street analyst that our algorithm tracks (once again, only those with 4 and 5-star Nobias ratings) is $145. Relative to TWLO’s present share price of $87, this average analyst price target represents upside potential of 75%.
Disclosure: Nicholas Ward has no TWLO position. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.