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Twilio: A stock pick by Higgo

May 8, 2022
Higgo van Biljon
Investments

Twilio provides programmable communication tools for making and receiving phone calls, sending and receiving text messages, and performing other communication functions using its web service APl's.

Services

  • Programmable messaging
  • Programmable voice
  • Sendgrid Emails
  • Programmable video
  • WhatsAppBusiness APl
  • The Twilio Super Network consists of various other innovative services. 

Why I’m bullish

  • Scalable business mode- APIs
  • High demand for services
  • Sticky product- Once a business uses Twilio, the switching cost is extremely high. Most of the businesses that I know,
  • including FinMeUp, use one of Twilio's services, especially Sendgrid. Once you have integrated their services, it does not make sense to switch to a competitor.
  • Share price had a massive pullback recently. Down 71% from July 2021.
  • Recurring revenue model
  • High net retention
  • High net expansion growth rate (131% in 2021)
  • Growth expected to continue
Guidance for Q1 2022:
  • Revenue of $855-$865
  • Representing Year-on-Year growth of 45-47%
Non-GAAP loss per share ($0.26-$0.22)
  • Insider overall net purchasers by 433 900 shares according to new Yahoo finance data in the past few months.
  • High organic growth (see chart)
  • CAGR growth of 59% since 2016
  • International revenue expanding
Revenues generated outside the US:
  • 2019: 29%, 2020:27%, 2021: 34%
  • Land & Expand growth strategy working well.
  • Twilio API first platform is seen to be ahead of competitors constantly.
  • Usually acquisitions can go really well or really bad, Twilio has been executing really well. For example, their acquisition of Sendgrid was an amazing one (In my opinion).
  • Extremely high analyst ratings- according to various analysts on various platforms, Twilio is highly undervalued.
Risks
  • Unprofitable: It is still very difficult to price an unprofitable company. Especially with feats of a recession. Twilio is still unprofitable, but I can see how it will become profitable in the next 3 years. I believe that they can produce really good margins once profitable.
  • Losses are still rising
  • Macro environment

If businesses suffer, Twilio might be affected, but their products are to an extent recessions proof, as they will be required through good and bad.

Conclusion

I’ve watched Twilio since the beginning of the year and I’m pulling the trigger. I’m buying. This is a long-term investment for me. If the share price falls further, I will buy more.

 

*Please see the supporting documents from Twilio's latest 2022 Q1 Financial results.

Quarterly Revenue for Twilio, stock pick

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