Twilio (NYSE:TWLO) stock has disappointed this year, but management believes recent acquisitions can put it into another gear.
After failing to meet expectations in its March earnings report, the pandemic favorite is doubling down on Application Program Interfaces (APIs) to fund another stage of growth.
The San Francisco company will pay $850 million for ZipWhip’s business texting system.
It has also made a supportive investment in Terazo, which offers software development as a service.
The aim is to build an “API economy.” It is based on simple software and back-end services let websites mimic entire businesses. Wall Street has cheered the moves, sending the stock back over $300. It should open this morning around $310.
A Closer Look at TWLO Stock
Twilio’s communication APIs made it a pandemic hit. Shares went from $60 in March 2020 to a high of $435 this February, but the reopening trade hit it hard.
When it announced a loss of $206.5 million for the March quarter, on revenue of $590 million, the stock fell again. The company guided to a growth-free second quarter with revenue of just $600 million and a smaller loss.
Despite the earnings miss, our Luke Lango is convinced that Twilio remains a growth stock. Investors demand rapid growth and a compelling story for the future as the price of investment. The second-quarter numbers showed Twilio consolidating at about a $2.4 billion/year run rate.
“Who cares about quarter-to-quarter fluctuations when you’re investing in a company like Twilio that is changing the way the world works?” he wrote.
Lango had special praise for the November acquisition of Segment. This is a customer data system Twilio said would “tear down” data silos and improve service.
The New Twilio
Twilio is now building out beyond communication with APIs that can handle all customer interactions.
It’s working with Stripe on Twilio Pay, an API that will enable payments from inside sites. It has invested in Hyro, which adds voice and chat to any application, starting with hospitals.
The company released a “state of personalization” report, arguing consumers demand customized interactions as the cost of doing business.
Twilio also released a “Super SIM” that lets companies seamlessly switch carriers for their Machine Internet services. Anything from a watch to a billboard can now change cell carriers after its service provider signs a new carrier contract.
The moves are aimed at clearing away negative implications from the March print, the forecast of a June quarter loss and slow quarter-to-quarter growth.
The new story makes Twilio an API company, building out a suite of solutions for customer interaction. From the first call or website visit, Twilio will provide sales, service, and any information a customer needs.
The Bottom Line
Analysts seem pleased and are now boosting TWLO stock. Of 18 who follow it on Tipranks, 16 are telling investors to buy. Their average price forecast for 2022 is 47% ahead of today’s price, at $447 per share.
It’s a tribute to 44-year-old CEO Jeff Lawson. He became a billionaire from his stake in the company in 2019. He started Twilio after a stint at Amazon.com (NASDAQ:AMZN) cloud, inspired by the idea of doing things “as a service.”
But Twilio was threatening to become a one-trick pony, its reach limited to bringing phone services to websites. Lawson has changed that perception and given the stock’s story a new lease on life.
On the date of publication, Dana Blankenhorn held LONG positions in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com.
