After Twilio's Rocky Year, Analyst Suggests Investors With High Risk Tolerance Revisit The Stock

Twilio Inc TWLO, one of 2016's most hotly contested stocks after a 92-percent surge in its first day of trading in 2016, hosted its first analyst day Tuesday in San Francisco. 

The Analyst

KeyBanc Capital Markets' Brent Bracelin maintains a Sector Weight rating on Twilio's stock with no assigned price target.

The Thesis

Twilio's management discussed a new strategy and vision for an engagement cloud platform that would become a centerpiece to support the company's next wave of growth, Bracelin said in a research report. (See Bracelin's track record here.) 

The engagement cloud would include 11 different APIs, including voice, chat, SMS, Facebook, studio," notify," understand, and more.

The strategy itself is impressive, as it focuses on a "broad vision of disrupting the $1 trilllion communications industry through simple software APIs and a developer-first approach," Bracelin said. Moreover, it appears to be "solidifying as it moves further up the stack with multiple API components that can be bundled to solve higher-level bottlenecks."

Aside from the new strategy game plan, Twilio's new COO George Hu discussed recent changes made to the company's go-to-market strategy, Bracelin said. This includes a recent initiative to boost account coverage within the customer base, and an increase in the number of quota-carrying reps from an estimated 43 percent of Twilio's sales organization in the fourth quarter of 2016 to 46 percent.

Bottom line, the past year has proven to be "challenging" for Twilio's stock, but the analyst is now assuming that its fundamentals will bottom in the first half of 2018. Investors with a high risk and volatility tolerance might find it beneficial to consider the bullish case for owning the stock in early 2018, according to KeyBanc. 

Price Action

Shares of Twilio have lost more than 13 percent since the start of 2017.

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