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If you've been interested in Twilio (NYSE: TWLO ), this might be your chance to buy some Twilio stock.
After the bearish move in the fourth quarter, investors are doing some bargain hunting. This could, of course, be a temporary relief rally. Keep in mind that by the end of December the selling did seem overdone.
But during such times, an interesting strategy is to actually look at those stocks that held up fairly well during the plunge. This is a clear sign that the prospects remain bright, regardless of the environment.
Twilio is a great example. Note that the shares are off roughly 12% from the 52-week high. By comparison, many high-flyer cloud operators are still down by 20%+ during Q4, like Docusign (NASDAQ: DOCU ), Zuora (NYSE: ZUO ) and Dropbox (NASDAQ: DBX ).
Granted, the strong relative performance of Twilio stock is no guarantee. The tech world can certainly be volatile. Yet when looking at the core business, there are some strong drivers. So here's a look at three that support the bull case for TWLO stock:
Twilio Stock Pro: Innovation
Founded in 2008, Twilio started out as a provider of Application Programming Interfaces (APIs), which made it easy to implement powerful features like SMS and voice services in apps. The timing was certainly spot-on as the company capitalized on the smartphone revolution. Consider that TWLO snagged customers like Facebook (NASDAQ: FB ) and Uber, which drove growth.
But TWLO has invested heavily in expanding its platform. Here are some examples:
- Programmable video : This includes a set of APIs that embeds video in an app, such as for remote customer care and collaboration.
- Flex : This is a contact center application. Actually, TWLO recently bolstered this with high-end payments processing.
- Artificial Intelligence (AI) : The company has created its own bot technology, Autopilot, for customer service.
- Twilio Super SIM : This is an API to deploy Internet-of-things (IOT) devices on a global basis. TWLO has signed tier-one carriers like Singtel and Telefonica.
TWLO Stock: Growth
TWLO is certainly growing at a rapid pace. In the latest quarter, revenues jumped by an impressive 68% to $168.9 million. During this period, the number of active accounts went from 46,489 to 61,153. Keep in mind that TWLO has a large community of developers.
A key to the growth has been TWLO's focus on the enterprise market segment. To this end, the company has created the Engagement Cloud, which has gotten lots of traction with larger customers. Flex has also been a key to the strategy.
As a sign of the success of this up-market strategy, the dollar-based net expansion rate in Q4 was about 145%. What's more, the company has done a good job of diversifying its customer base.
Twilio Stock: SendGrid
Over the years, TWLO has made a few tuck-in acquisitions (say for Ytica, Kurento and Beepsend SMS). All have been focused on adding key functions to the platform.
But recently, TWLO has gotten much bolder. Consider that the company has agreed to acquireSendGrid (NYSE: SEND ) for roughly $2 billion. And yes, I think this deal should be a winner.
SendGrid is a top provider of email APIs, with over 74,000 customers. Keep in mind that the addressable market opportunity is a whopping $10 billion .
So all in all, Twilio stock will be able to broaden its platform, which should help win even more business. In fact, on an annualized basis, the combined revenues are expected to come to a hefty $734 billion.
Tom Taulli is the author of High-Profit IPO Strategies , All About Commodities and All About Short Selling . Follow him on Twitter at @ttaulli . As of this writing, he did not hold a position in any of the aforementioned securities.
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