Customer-engagement platform Twilio (NASDAQ:TWLO) has been on a tear in the past year, boosted by Covid 19-induced positive catalysts. In the last year, TWLO stock has nearly tripled, showing how enthused investors are about the stock.
The company’s exponential growth in the past few years has made it one of the most successful Data/AI companies globally. The firm continues to evolve its business, suggesting that its shares can still climb considerably above their current levels.
Initially, Twilio allowed companies to develop software that enabled them to communicate with their customers across several channels. Later, it started offering a developer-oriented cloud-based platform.
That platform, Twilio Flex, allows its users to utilize a cloud-based customer contact center. These developments were effectively building up to the pièce de résistance, the incorporation of AI into Twilio’s unique platform. In the future, the company plans to expand its platform further.
Twilio Reported Stellar Earnings Again
Twilio benefitted immensely from the accelerating digital transformation trends spurred by the pandemic. As a result, the company’s earnings have been amazing in the past year, with its revenues growing by double-digit-percentages year-over-year in all four quarters. In the fourth quarter, its top line soared 65% YOY.
Furthermore, it reported a surprise profit, excluding certain items, of 4 cents per share. Its revenue and EPS comfortably surpassed analysts’ average estimates yet again. Further, it added 13,000 new customer accounts during the quarter, taking its total customer base to 221,000.
In Q1, the company expects to post an adjusted EPS loss of 9 cents to 12 cents on $526 million to $536 million of revenue,. representing 44% to 47% YOY revenue growth. That would be a slightlylower growth rate than during the same period last year. Analysts, on average, expect an adjusted per share loss of 2 cents on $492.1 million of revenue. Meanwhile, the company is continually reducing its dependency on its top customers, positively impacting its long-term profit outlook.
Massive Opportunity
The big question about Twilio is whether it can continue growing at its current staggering pace for the foreseeable future. Over the last five years, Twilio’s average annual revenue growth is a mind-boggling 63%. The company has increasingly successfully attracted new customers to its platform.
The massive influx of new customers is allowing the company to cross-sell its products effectively. That’s happening as Covid 19 has accelerated the shift to the cloud and other digital platforms, playing right into the hands of companies such as Twilio. The company’s net expansion rate of over 130% shows that this dynamic is already playing out.
More and more companies are looking for new ways to engage with their customers. Twilio provides a diverse product portfolio that caters to that need, and the quality of its products is continuously improving. Demand for the company’s products will continue to climb, boosting its margins.
The Bottom Line on TWLO Stock
TWLO stock has been soaring in the past year, with the pandemic accelerating its growth. The firm is less dependent on a few of its major clients, and that trend should improve its operating margins. Additionally, the stickiness of its products will enable it to continue to rake in massive gains through cross-selling. Though the stock is trading at a very high valuation, its premium is justified by its impeccable results.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
