Twilio Inc.

TWLO Details

Twilio Inc. (NYSE: TWLO) is a cloud communications platform that enables software developers to build, scale, and manage real-time communications within their applications. The company offers a customer interaction platform that comprises software for specific use cases, including account security and contact centres, and a set of Application Programming Interfaces (APIs) (APIs). It also offers a set of APIs that developers may use to integrate phone, messaging, video, and email functions into their apps.

Latest News:

• Collaboration with LumenVox: On February 16, 2022, LumenVox, a prominent speech and voice technology provider, has announced that it would supply high-performing, speech-enabling technologies to TWLO, the leading cloud communications platform. Twilio's Voice and Flex solutions will be bolstered by the LumenVox Speech Experience

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, unlike one vote per share for its Class A common stock. 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 corporate decisions.
• Dependence on Third-parties for SaaS Technologies : TWLO runs critical internal business processes like enterprise resource planning, customer assistance, and customer relations using third-party hosted SaaS technologies. As a result, if these services are unavailable for an extended period owing to outages or interruptions or because they are no longer available at commercially fair pricing, 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 55.49% in the past nine months and has made a new 52-week low today. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 173.32.

Considering the significant correction in the stock price, robust topline performance, collaboration with LumenVox, launch of Twilio Ventures, growth in Active Customer Accounts, encouraging outlook, associated risks, and current valuation. We recommend a "Buy" rating on the stock at the closing price of USD 140.00, down 5.93% as of March 07, 2022.

Three-Year Technical Price Chart (March 07, 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.