4 Twilio Analysts On Cloud Company's Q2 Beat: 'Terrific Story'

Twilio Inc TWLO reported second-quarter results Tuesday that were favorably driven by the COVID-19 pandemic, as its customers are scrambling to accelerate their digital transformation.

Here's how the Street reacted to the print. 

The Twilio Analysts

BofA Securities analyst Nikolay Beliov maintains a Buy rating on Twilio's stock with a price target lifted from $280 to $335.

Needham analyst Richard Valera maintains at Buy, price target lifted from $225 to $310.

Piper Sandler analyst Brent Bracelin maintains at Overweight, price target lifted from $225 to $300.

Rosenblatt Securities analyst Ryan Koontz maintains at Neutral, price target lifted from $235 to $255.

Related Link: Twilio: Q2 Earnings Insights

BofA Says Twilio's Strong Results Were Expected

Twilio was expected to report upside to Street estimates, and the company didn't disappoint, Beliov said in a note.

Revenue growth of 46% in the quarter was ahead of the Street's estimates amid strong usage in SMS, voice, video and email, the analyst said. 

The dollar-based net expansion rate was "solid" at 132% versus estimates of 127%, whilethe  customer count accelerated 24% year-over-year.

While the gross margin was down 360 basis points to 56%, it is still consistent with the historical norm in the mid-to-high 50s range, according to BofA. 

Needham Says Twilio Benefits From COVID-19 Digital Acceleration

Twilio is benefiting from the acceleration of digital transformation plans among its customers, resulting in better demand for Flex and APIs, Valera said in a note. The company also saw strength for its food delivery, curbside pickup, retail logistics, telehealth and education segments. This more than offset the negative impact seen in segments like hospitality and ride sharing, the analyst said. 

Twilio's second-quarter momentum will carry over to the third, as management's guidance range of $401 million to $406 million is ahead of the Street's estimate of $379 million, he said.

The EPS guidance of a loss of 5-9 cents per share was roughly in-line with the Street, as Twilio is planning to catch up on already announced investments and hiring, according to Needham. 

Piper's New Takeaways On Twilio 

Twilio's quarter was highlighted by strong new customer additions that brought its total customer accounts north of 200,000, Bracelin said in a note.

The analyst named the following as notable takeaways from Twilio's second quarter: 

• The midpoint of management's third-quarter guidance is $24 million above the consensus estimate and implies 37% year-over-year growth.
• WhatsApp represented 7% of sales and continues to grow faster than overall growth.
• Twilio is speeding up investments to support the growing number of video use cases.
• Demand linearity has been "steady" during the pandemic.
• The company benefited from email cross-sell wins across Peloton and Zoom, while Flex activity remains strong.

Rosenblatt's Twilio Valuation Concerns

Twilio offers investors a "terrific story" as the leading supplier of Communications Platform as a Service — CPaaS — and is backed by the most advanced products and channels, Koontz said in a note.

Yet the stock's valuation is a concern, as it commands a software multiple that is applied to an "inherently lower" gross margins business, the analyst said. 

TWLO Price Action: Shares of Twilio were trading lower by 5.06% at $264.01 at last check Thursday. 

Related Link: 10 Biggest Price Target Changes For Wednesday