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 centers 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 programs.

Latest News:

• Recent Appointments: On April 28, 2022, TWLO hired two new people. Reeny Sondhi was appointed Chief Digital Officer, and Amy Holcroft was appointed Chief Privacy Officer. Sondhi will drive the scaling of all IT operations as the company focuses on scaling and becoming an end-to-end customer interaction platform as Chief Digital Officer. She will be stationed in San Francisco and report to Khozema Shipchandler, Chief Operating Officer. Holcroft will oversee the team in charge of safeguarding the interests of Twilio's more than 250,000 customers and ensuring compliance with data privacy legislation as Chief Privacy Officer. Holcroft will be based in London and report to Dana Wagner, Twilio's Chief Legal Officer.

Q2FY22 Results:

• Growth in Topline: The company reported a sharp uptick of 48.37% in revenues to USD 875.36 million in Q1FY22 (ended March 31, 2022) compared to USD 589.99 million in Q1FY21, attributable to growth in Active Customer Accounts to 268,000 as of March 31, 2022, vs. 235,000 as of March 31, 2021.
• Increase in Net Losses: However, AKTS witnessed an increase in net losses to USD 221.63 million in Q2FY22 vs. USD 206.54 million in Q2FY21.
• Cash and Debt Position: As of March 31, 2022, the company had a cash balance of USD 5.22 billion and outstanding debt of USD 1.01 billion.

Key Risk:

• Voting Concentration Risk: The Class B common stock of TWLO has ten votes per share, while the Class A common stock has just one. 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 choices.
• Dependence on Third-parties for SaaS Technologies: TWLO uses third-party hosted SaaS solutions to manage critical internal company processes such as 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 due to outages or interruptions or are no longer available at commercially reasonable prices.

Outlook:

Q2FY22 Guidance (Source: Earnings Presentation, Q1FY22, May 04, 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' stock price has fallen 69.04% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 105.56 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 141.14.

Considering the significant correction in the stock price, low leverage, positive outlook, key management changes, current valuation, and associated risks. We recommend a "Buy" rating on the stock at the closing price of USD 116.73, down 1.48% as of May 05, 2022.

Three-Year Technical Price Chart (May 05, 2022). 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. 

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