Piper Jaffray Sees 30% Upside To Twilio

Twilio Inc TWLO has nearly recovered from a two-year slump, but Piper Jaffray sees the stock continuing well beyond its all-time highs.

The Rating

Analysts Alex Zukin, Scott Wilson and Taylor Reiners initiated coverage on Twilio with an Overweight rating and $70 price target.

The Thesis

Piper Jaffray considers Twilio “unique” and “highly-coveted” with multiple opportunities to increase revenue.

“With a developer-focused distribution model coupled with more strategic enterprise use cases and recent experienced enterprise leadership, we see a scenario where Twilio eclipses $1 billion in revenues by 2020 while still growing 30 percent-plus staying in the high-efficiency bucket over the next few years,” the analysts wrote in a Monday note.

That $1 billion mark is seen to be struck by Twilio’s accelerating core business, alone. Piper Jaffray expects the firm’s new Flex product, which has potential to disrupt the $10 billion call center market, to lend upside in and after 2019.

At the same time, Twilio is forecasted to profit from high-profile customers like Uber and WhatsApp, and its new executives from salesforce.com, inc. CRM and Microsoft Corporation MSFT are seen to set the stage for gross-margin improvement.

“While some investors may question the company's GM profile, one thing that is difficult to question is the gross profit dollar growth of the business over the last three years which has a CAGR of 67 percent,” the analysts wrote.

Price Action

At time of publication, shares were trading down 2.6 percent at a rate of $53.78.

Related Links:

Twilio Has 'Impressive' Start To 2018, KeyBanc Says After Q1 Beat

Canaccord On Twilio's Q4: Not Much For Shorts To Complain About