Twilio Inc (NYSE:TWLO) is on fire today as investors continue to digest its first earnings report as a public company. Given the smoking-hot start of TWLO stock and strong financial performance so far, a few people are already mentioning Twilio hand-in-hand with Facebook Inc (NASDAQ:FB).
Let’s get something straight: Twilio and Facebook are two entirely separate companies that have very little in common.
But TWLO stock could have one heck of a run and make you some money. So on that front, if you want to say Twilio is the next Facebook … heck, go ahead.
What Is Twilio About?
Twilio is in the business of cloud-based, communication APIs. An app developer can call on these APIs, plug them into their larger application and quickly be up and running with voice calls, data calls, even authentication and commerce. This cuts time to market and, much like a transaction processor such as Visa Inc (NYSE:V), Twilio just takes a small cut.
Twilio was not the first company to come up with this idea. Twitter Inc (NYSE:TWTR) was selling app developers API tools almost two years ago, under the name Fabric. Fabric handles things like app stability, distribution, analytics, communication, even integration with Amazon.com, Inc. (NASDAQ:AMZN) Web Services.
What Twilio has figured out is the business model, and its own monetization. The company delivered some sweet numbers in its first quarterly report — sales of $64.5 million against $37.95 million a year ago, a gross profit amounting to more than half of sales, and a doubling of a debt-free asset base.
This has created a market cap of nearly $4 billion on trailing-year sales of $166.95 million. Even if TWLO can more than double that — and the present pace indicates it won’t — you’re still taking about a valuation of more than 10 times 2016 sales. The customer count is up just 50%, from 21,226 to 30,780.
Twilio Atop the Buzzword Table
With so many great Internet “unicorns” like Uber, AirBnB and Snapchat still in the hands of private capital, TWLO stock is one of the few places a public investor can play profitably if they’re interested in mobile, apps, cloud and the monetization of this trend. That’s why there is so much interest.
But is Twilio “the future of cloud computing” or just early into the next big thing — app add-ins that speed time to market and monetization?
TWLO has a lot of customers, but when it comes to revenue it’s still highly dependent on (hey!) Facebook, which could always develop its own solutions to the problems Twilio solves. Fabric is still out there, as are under-the-radar, private offerings like Bandwidth.
One answer the company offers is a strong management team, led by Jeff Lawson, a former product executive at Amazon Web Services. He understands the business, that companies no longer need their own IT staff to build applications — they can go to code repositories like Stripe or Github and develop without knowing code. Which means Lawson knows how to move fast.
TWLO: A Unicorn You Can Buy
With Twilio, business developers can pick up the key communication components any good app needs and have the code running within days, rather than months. In TWLO stock, investors can pick up a fast-growing company in the business of developing cloud applications, which knows how to monetize them.
Stripe and Github are in the hands of private equity too, but they’re private unicorns like all the rest. Twilio is not incredibly unique in the app economy, or in the cloud market, it may or may not be the next Facebook, but it is that rarest of all unicorns.
It’s one you can buy.
Dana Blankenhorn is a financial journalist who dabbles in fiction, his latest being The Reluctant Detective Travels in Time. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he was long AAPL and MSFT.
