Twilio Inc.

TWLO Details

Twilio Inc. (NYSE: TWLO) is a cloud communications platform that allows software developers to create, scale, and manage real-time communications within their apps. The company provides a customer interaction platform that includes software for specific use cases, such as account security and contact centres, and a set of Application Programming Interfaces (APIs) that can be used to interact with customers (APIs). It also provides a set of APIs for developers to use in their apps to integrate phone, messaging, video, and email functions.

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 ten votes per share, whereas its Class A common stock has only one vote per share. As a result, the company's executive officers, employees, directors, and affiliates controlled 21.3% of the voting power as of December 31, 2021, limiting the ability of other shareholders to influence corporate decisions.
• Dependence on Third-parties for SaaS Technologies: TWLO uses third-party hosted SaaS technologies to run critical internal business processes like enterprise resource planning, customer assistance, and customer relations. As a result, TWLO's financials may suffer if these services are unavailable for an extended period of time due to outages or interruptions or because they are no longer available at commercially reasonable prices.

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 61.43% 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 183.12.

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 "Buy" rating on the stock at the current market price of USD 148.45, down 3.20% as of April 07, 2022, at 09:29 AM PDT.

Three-Year Technical Price Chart (as on April 07, 2022, at 09:29 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and 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 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 unfavourable movement in the stock prices.

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

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