Twilio Inc.

TWLO Details

Twilio Inc. (NYSE: TWLO) is a cloud communications platform that lets software developers build, expand, and manage real-time communications within their products. The firm offers a customer interaction platform that includes software for specific use cases like account security and contact centres and a set of Application Programming Interfaces (APIs) for interacting with customers (APIs). Developers can use a set of APIs to integrate phone, message, video, and email functions into their programmes.

Q4FY21 Results:

• Surge in Topline: The company reported YoY growth of 53.76% in revenue to USD 842.74 million in Q4FY21 (ended December 31, 2021) compared to USD 548.09 million in Q4FY20, attributable to growth in Active Customer Accounts to 256,000 as of December 31, 2021, vs. 221,000 as of December 30, 2020.
• Expansion of Net Losses: In Q4FY21, TWLO's net losses expanded to USD 291.40 million from USD 179.35 million in Q4FY20.
• Cash and Debt Position: As of December 31, 2021, TWLO had cash and cash equivalents (including short-term investments) of USD 5.36 billion and total debt of USD 1.01 billion.

Key Risk:

• Voting Concentration Risk: TWLO's Class B common stock has 10 votes per share, but it's Class A common stock only has one. As a result, as of December 31, 2021, the company's executive officers, employees, directors, and affiliates controlled 21.3% of the voting power, limiting other shareholders' capacity to influence business decisions.
• Dependence on Third-parties for SaaS Technologies: TWLO runs essential internal business activities like enterprise resource planning, customer assistance, and customer relations using third-party hosted SaaS solutions. As a result, if these services are unavailable for a lengthy period owing to outages or interruptions, or if they are no longer available at commercially fair costs, TWLO's financials may suffer.

Outlook:

Q1FY22 Guidance (Source : Earnings Presentation, Q4FY21, February 09, 2022)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

TWLO's stock price has fallen 62.96% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 123.05 to USD 412.68. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 159.57.

Considering the significant correction in the stock price, solid topline performance, growth in Active Customer Accounts, encouraging outlook, associated risks, and current valuation. We recommend a "Hold" rating on the stock at the current market price of USD 143.995, up 9.82% as of April 19, 2022, at 10:32 AM PDT.

Three-Year Technical Price Chart (as on April 19, 2022, at 10:32 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

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

Note 2: All forecasted figures and industry information have been taken from REFINITIV.  

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