Company Reports

We are maintaining our fair value estimate of $73 per share after Twilio announced the results of its strategic review and initiated its 2024 outlook. In short, Twilio will keep its Segment business, introduced Thomas Wyatt as the president of the segment business, announced an additional $2 billion stock buyback, offered solid guidance for 2024, and presented a profitability target for 2025. While these are important steps in the company’s ongoing restructuring efforts, execution will be paramount. In particular, we think segment is immature and will require investment, which runs counter to the margin expansion targets laid out by the company. Overall, we welcome the clarity and see some value in the shares for patient investors, but we still see the road as long and challenging.

With its cloud native communication platform as a service, or Kpas, we think Twilio is well on its way to unlocking the power of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure and has established a narrow moat. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. We believe Twilio is a caps leader, and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Narrow-moat Twilio reported strong fourth-quarter results with both revenue and profitability handily exceeding our expectations. Guidance for the first quarter is just below our revenue expectations, but easily surpasses our profitability expectations. We think the market is overreacting to the disappointing revenue guidance and not fully appreciating near-term profitability hindering measures taken now in order to lower overall stock-based compensation over the long term. When considering prudent operating decisions that should increase future profit margins, the continued momentum of its communications unit, and the time value of money, we raise our fair value estimate to $73 per share from $64 and view shares as fairly valued.

Narrow-moat Twilio announced on Jan. 8, 2024, that its co-founder and CEO, Jeff Lawson, was stepping down and that Khozema Shipchandler was appointed as the new CEO and is joining the board of directors. The company also announced that it expects results for the fourth quarter of 2023 for both revenue and non-GAAP operating income to exceed the high end of guidance ranges provided on Nov. 8, 2023. While we normally do not like to see leadership changes, we see Shipchandler as a natural choice to lead Twilio in a post-COVID-19 world, and we do not expect any immediate impact to the firm's moat. We are maintaining our fair value estimate of $64 per share, and we view shares as slightly overvalued.

Narrow-moat Twilio reported strong third-quarter results with both revenue and profitability materially above our expectations. Guidance for the fourth quarter met our expectations for revenue and was a bit ahead of our profitability forecast as previous restructuring measures are paying dividends. We expect revenue to remain subdued as Twilio’s customers undertake internal cost-saving measures as a result of the macro environment. Based on results and guidance, we have made minor near-term adjustments to our model and are maintaining our fair value estimate of $64 per share. Shares popped to about $60 per share as of writing, and we view shares as fairly valued.

Narrow-moat Twilio reported blowout second-quarter results with both revenue and profitability well-ahead of our expectations. Guidance was mixed with immediate near-term pressure arising from a change to 10DLC messaging rules, while non-GAAP operating profit is tracking ahead of management’s prior outlook. We see green shoots with continued maturation of the specialized salesforce for data and applications, where management characterized the pipeline as robust and bookings showing good momentum. We are also encouraged by stabilization in messaging volumes. Recent restructuring actions are clearly bearing fruit, as profitability was strong, and large deals are still being won. Based on results and guidance, we raised our profitability estimates and are therefore raising our fair value estimate to $64 per share, from $56 previously. We view shares as fairly valued at present levels.

With its cloud native communications platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the power of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communications infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure and has established a narrow moat. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. We believe that Twilio is a CPaaS leader and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Narrow-moat Twilio reported solid results with good revenue and strong profitability. However, guidance for the second quarter, while only slightly below our model on profitability, was materially below on revenue. Macro pressures are hurting more than anticipated, while the new sales team for data and applications is not fully ramped, and the disposition of the Internet of Things business is an incremental modest headwind. On the positive side, recent restructuring actions are already bearing fruit, as profitability was strong, and large deals are still being won. We are significantly reducing our growth estimates throughout our model, and as a result, are cutting our fair value estimate to $56 per share, from $95 previously. We think the stock remains a work in progress with the timing of growth acceleration a moving target, and we therefore prefer our wide-moat names currently.

With its cloud native communications platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the power of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communications infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure and has established a narrow moat. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. We believe that Twilio is a CPaaS leader and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Narrow-moat Twilio reported meaningful upside on the top and bottom lines for its fourth quarter, provided strong profitability guidance for 2023, and announced a $1 billion stock buyback, with $500 million occurring in the next six months. The firm dropped other news as well, including an additional 17% head count reduction on top of the 11% cut made last year, and a new business structure for the communications unit and the data and applications (formerly referred to as software) unit, both with new business leaders. We were already contemplating meaningful margin improvements over the next five years and see no change to our long-term outlook; therefore, we are maintaining our fair value estimate of $95 per share. We see the shares as undervalued but prefer some of our wide-moat names based on our concerns about the macroenvironment.

With its cloud native communications platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the power of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communications infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure and has established a narrow moat. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. We believe that Twilio is a CPaaS leader and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Narrow-moat Twilio reported third-quarter results in conjunction with its analyst day. Results were generally solid from revenue and profitability perspectives, while the fourth-quarter outlook was meaningfully below our revenue estimate and below our profitability estimate, as well. Between macro pressures and lower-than-expected guidance, we are cutting our fair value estimate to $95 per share, from $140 previously. We see cracks in the thesis that are certainly fixable, including the recent shut down portions of Zipwhip after acquiring the company for $840 million in 2021; a material headcount reduction that seemingly has no impact on previously issued profitability guidance for 2023; refusing political campaign text messaging, which normally provides a revenue bump in the fall; a lack of profitability despite what will likely be about $3.8 billion in revenue this year; and changes in the company’s go-to-market motion. Despite the upside our model shows for the stock, we would avoid it for now given the heightened near-term risk.

With its cloud native communication platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the imagination of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure and has established a narrow moat. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. We believe Twilio is a CPaaS leader, and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

We are lowering our fair value estimate for Twilio to $140 per share, from $170 previously after the company reported strong results but offered a muted outlook for the third quarter. Like for most of our coverage, we view the stock as attractive. Demand remains robust, with limited pockets of weakness and no significant signs of a recessionary environment. While profitability within the quarter was better than we anticipated, it is worse than we expected for the third quarter. Persistently strong messaging is a great sign for new business growth but leaves us more cautious on margins over the medium term. We see gross margins expanding over time as Flex, Engage, and Segment grow within the mix, but we ultimately expect Twilio to offer a lower margin profile than many other enterprise companies. To its credit, management is increasingly focused on profitability and reiterated its goal for positive non-GAAP operating margins in 2023.

With its cloud native communication platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the imagination of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure and has established a narrow moat. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. We believe Twilio is a CPaaS leader, and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Twilio is a cloud-based communication-platform-as-a-service, or CPaaS, company offering communication application programming interfaces, or APIs, and prebuilt solution applications aimed at improving customer engagement. Through these APIs, Twilio’s platform allows developers to embed messaging, voice, and video functionality into other applications. We believe narrow-moat Twilio has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform.

Narrow-moat Twilio reported strong first-quarter results, with revenue and adjusted earnings exceeding both management’s and our at-consensus expectations, but issued a mixed outlook for the second quarter. Management issued in-line guidance on revenue, but below consensus on the bottom line, which we think reflects 2022 being a cost-peak for a series of targeted investments made in the company, namely go-to-market development for Twilio Flex and Segment. As these businesses begin to post sales growth in excess of the investments made in developing them, we expect profitability to benefit. We continue to believe Twilio is uniquely positioned to benefit from accelerated digital transformation initiatives and the trend toward data-informed digital customer engagement.

Twilio is a cloud-based communication-platform-as-a-service, or CPaaS, company offering communication application programming interfaces, or APIs, and prebuilt solution applications aimed at improving customer engagement. Through these APIs, Twilio’s platform allows developers to integrate messaging, voice, and video functionality into business applications. We believe narrow-moat Twilio has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform.

Twilio is a cloud-based communication-platform-as-a-service, or CPaaS, company offering communication application programming interfaces, or APIs, and prebuilt solution applications aimed at improving customer engagement. Through these APIs, Twilio’s platform allows developers to integrate messaging, voice, and video functionality into business applications. We believe narrow-moat Twilio has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform.

Narrow-moat Twilio reported strong fourth-quarter results that exceeded both management’s and our expectations on the top and bottom lines, and issued healthy guidance for the first quarter of 2022. COVID-19 accelerated the digital transformation initiatives and online customer engagement of companies, tailwinds that we expect to persist and secularly advance Twilio’s adoption. Further, tightening data privacy regulations and shifts from out-of-the-box to customizable top-of-stack business applications are affording Twilio heightened alignment between its offerings and evolving customer demand.