Profitability Down but Prospects High; Twilio Outperforms Only To Immediately Reinvest; FVE to $300

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.