In 2022, Cathie Wood and Ken Griffin’s paths couldn’t have diverged any more sharply. While Wood’s bet on innovative growth-flavored stocks proved disastrous with her flagship ARKK fund posting huge losses, Griffin’s Citadel hedge fund notched profits of $16 billion – the most Wall Street had ever seen.
But while the two famous investors’ fortunes differed dramatically last year, the pair have some things in common; both try to beat the market using singular techniques whether it’s Wood’s penchant for doubling down on the outré and cutting-edge or Griffin’s adherence to quantitative investment techniques. And at times the two paths meet: some of the stocks nestling in their respective portfolios are the same. Therefore, when two very different heavy hitters show a preference for similar names, investors should take note.
With this in mind, we dipped into the TipRanks database and pulled up the details on one stock both have been padding the portfolio with. With help from the platform, we can also find out what the Street’s cadre of analysts have to say about this name. Let’s take a closer look.
Twilio Inc. (TWLO)
The Wood/Griffin pick we’re looking at is Twilio, a CPaaS (communication platform as a service) leader. Using a set of configurable communication tools, Twilio’s cloud communications platform enables client engagement. The platform enables app developers to integrate voice, messaging, video, and email functionality. From its impressive clientele, which includes companies like IBM eBay, Reddit, Shopify, Airbnb, and Uber among plenty of others, it is evident that Twilio is at the vanguard of this secular trend.
Indeed, Twilio rode the pandemic-driven pivot toward digital channels well and the shares benefitted immensely during the Covid crisis. But former tech high-flyers were thoroughly decimated in last year’s bear and the stock took a big hit. However, the shares have been on the comeback trail in 2023, helped along by a strong Q4 print.
In the quarter, the company generated revenue of $1.02 billion for a 21.6% year-over-year increase, while beating the Street’s call beats by $20 million. Twilio saw out the year with more than 290,000 Active Customer Accounts compared to 256,000 at the end of 2021.
On the bottom-line, adj. EPS came in at a surprise profit of $0.22, well ahead of the -$0.08 predicted by the analysts. And the company guided for Q1 EPS between $0.18 – $0.22, also far above consensus at 0.01.
Wood was already a big fan but bought another 583,314 TWLO shares in Q4, bringing her total holdings to 7,409,945 shares. At the current market price, these are now worth $556 million. As for Griffin, he pulled the trigger on 1,554,498 shares in the quarter. In total, he now owns 1,562,298 shares worth over $117 million.
Also showing confidence in the CPaaS player is JMP analyst Patrick Walravens, who sees several reasons to back Twilio, including: “1) it has the dominant developer-focused communication platform, which it is reverting to a product-led growth strategy; 2) it offers a growing suite of high-margin customer engagement software solutions, including Flex, Segment, and Engage, which are now operating as a separate business unit; 3) it addresses a large TAM estimated to be ~$80B in 2022; 4) the company’s new focus on driving profitability coupled with actions like a $1B buyback and CEO Jeff Lawson’s plan to purchase $10M of common stock in the open market; and 5) the impending conversion of the Class B shares into Class A shares on June 28, 2023 reflects the next stage of Twilio’s growth and maturation and a positive development from a corporate governance perspective, in our view.”
All in, Walravens rates TWLO shares an Outperform (i.e., Buy), along with a $110 price target. The implication for investors? Upside of 45% from current levels. (To watch Walravens’ track record, click here)
Looking at the consensus breakdown, based on 14 Buys, 10 Holds and 1 Sell, the stock claims a Moderate Buy consensus rating. Going by the $84.78 average target, the shares will climb ~12% higher in the year ahead. (See Twilio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.