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Fundamental Analysis:TWILIO (#TWLO)

Twilio is an American cloud communications platform as a service company based in San Francisco, California. Twilio allows software developers to programmatically make and receive phone calls, send and receive text messages, and perform other communication functions using its web service APIs

💡 J.P. Morgan raises its TWLO recommendation to Buy and increases its target price to $ 465.

⚡️ Unlike J.P. Morgan expected the pandemic to have a more neutral impact on Twilio #TWLO, given the decline in customer activity, tourism, taxi aggregators and hospitality sectors (~ 10% of revenues excluding email), this was offset by strong growth in the healthcare / education / e-commerce sector (telemedicine and online food delivery orders).

⚡️ Growth factors:

  • The vast majority of messages processed by Twilio are outbound and one-way from business to customer. Analysts are already beginning to see a gradual rise in two-way messaging, which should be a multi-year driver of revenue growth.

  • Twilio is also heading in the right direction with the acquisition of Segment, which is a leading platform for researching customer activity across multiple channels. Analysts expect Segment's growth in API calls and overall call volume to be positive.

  • In addition, Segment has an impact on Twilio's growth rate and gross margin, as the company was growing 2x faster than the acquirer before the acquisition and had a gross margin (non-GAAP) of about 75%. Strengthening Twilio's market position and increasing customer engagement across multiple channels will accelerate growth in 2021.

📖 Financial indicators:

  • High Growth Revenue: TWLO's revenue (20.9% per year) is forecast to grow faster than 20% per year.

  • Earnings vs Market: TWLO is forecast to remain unprofitable over the next 3 years.

  • Stable Cash Runway: TWLO has sufficient cash runway for more than 3 years based on its current free cash flow.

  • Short Term Liabilities: TWLO's short term assets ($3.4B) exceed its short term liabilities ($448.3M).

  • Long Term Liabilities: TWLO's short term assets ($3.4B) exceed its long term liabilities ($586.5M)

  • Insider Selling: TWLO insiders have only sold shares in the past 3 months for approx. $13m

✅Twilio #TWLO 🎯Target price - $ 465, upside potential + 35%

OTB Global Investments

London, 9 March 2021

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