Analyst Note| Dan Romanoff, CPA |
Narrow-moat Twilio reported strong second-quarter results bolstered by coronavirus-related projects and guided above investor expectations. We think Twilio benefits from a wide host of use cases that support its resilience, as the company touted a diversified customer base of more than 200,000 organizations. Many of the uses for Twilio represent greenfield opportunities, and we believe the company has ample opportunity to increase revenue over the decade as it continues to expand uses for its platform. That said, the company benefited from the immediacy of COVID-19-related projects and existing customers even as it continued to rapidly gather new accounts. Management noted some green shoots and sees some signs of macro improvement. We are raising our fair value estimate to $153 per share, from $143, based on strong quarterly results and upside to our model with respect to third quarter guidance. Despite being above consensus through 2021 heading into the quarter, we see shares trading at a material premium to our fair value and therefore cannot recommend the stock to investors.