Twilio Inc.

TWILIO Details

Twilio Inc. (NYSE: TWLO) is a cloud communications platform, which enables developers to build, scale and operate real-time communications within software applications. The Company offers a customer engagement platform with software designed to address specific use cases, like account security and contact centers, and a set of Application Programming Interfaces (APIs).

Latest News:

• Partnership alliance with Red Oxygen: The Twilio Technology program announcement is the second meaningful partnership Red Oxygen this year. The company also announced a strategic partnership with Residential Management Systems (RMS) in May. As part of that partnership, Red Oxygen's SMS solutions are now recommended by RMS through its Mercury products, which enable university and college housing and residential staff to deliver revolutionary, customized content to students and housing team.
• New CEO: Twilio announced on May 16, 2022, the appointment of Joyce Kim as Chief Marketing Officer, who would drive worldwide marketing and execute the company's mission of becoming the leader in the burgeoning customer interaction category.
  

Financial Highlights: Q1 FY22 Results:

• Tremendous Revenue Growth: The company reported YoY growth of 48% in total net revenue to USD 875.4 million in Q1FY22 (ended March 31, 2022) from USD 590.0 million in Q1FY21. The drive force was growth in Organic revenue which was 35% in YOY basis.
• Increase in active customer base: TWILIO showed constant increase in Active Customer Accounts which stands at 268,000 as of March 31, 2022, compared to 235,000 active accounts on March 31, 2021.
• Strong performance in Dollar rate: Dollar-Based Net Expansion Rate was 127% for the first quarter of 2022, compared to 133% for the first quarter of 2021. Non-GAAP net income per share attributable to common stockholders was 184.5 million non-GAAP weighted average shares outstanding in the first quarter of 2022, compared with non-GAAP net income per share attributable to common stockholders on 180.6 million non-GAAP weighted average shares outstanding in the first quarter of 2021.

(Source: Analysis by Kalkine Group)

Outlook:            

• Q1FY22 Outlook showed 48% Year-Over-Year growth, Twilio expects the same out performance in the next few quarters as well with increased focus on customer engagement
• The board expects 70% of the average top-line revenue increase among companies that invested in digital customer engagement over the past two years. For 7% of responding companies, revenues tripled after investing in digital customer engagement.

Key Risks:

• Natural risk: Twilio business is subject to the risks of pandemics, earthquake, fire, floods and other natural events that can happen and interruption by man made problems such as data security and hacking.
• Regulatory Risk: TWLO's goods are subject to telecommunications-related rules, and future legislative or regulatory measures that might have an impact on the company’s profitability. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Source: Analysis by Kalkine Group)

Stock Recommendation:

TWLO reported solid performance in the Q1FY22, with growth of 48% in total net revenue to USD 875.4 million in Q1FY22 from USD 590.0 million in Q1FY21. The Increase in active customer base on quarterly basis is clear sign of growth and positive sentiments we can expect in the coming quarters as well. Though, the only concern stands out is the regulatory risk the business is exposed to.

From a technical standpoint, the stock price has dropped 70.97% in the last nine months and is currently tilted towards the lower end of its 52W range of USD 77.14 (16-June-2021) and USD 412.68 (23-July-2022). However, on daily price chart TWLO shares are gaining momentum, with leading momentum indicator 14-day RSI showing good pull back from oversold zone of less than 30 and the MACD is rising and registered a crossover above 9-day SMA signal line, bullish indication. Further, on daily chart its shares just moved above 21-day SMA, and it can test 50-day SMA, a decisive move above 50-day SMA could bring short-term strength in stock from the current trading levels.

Considering the significant correction in the stock price, robust balance sheet, strong liquidity, associated risks, technical indicators, and current valuation. We recommend a "Buy" rating on the stock at the closing price of USD 99.51 as of June 24, 2022, at 11:51 AM PDT.

1-Year Technical Price Chart (as of June 24, 2022, at 11:05 AM PDT). Source: REFINITIV, Analysis by Kalkine Group 

Technical Analysis Summary:

*Entry Price as of June 24, 2022, at 11:05 AM PDT.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.