The past twelve months have been tough for Cloud communications platform provider Twilio’s (TWLO) shares, which have underperformed the NASDAQ’s TTM rally of 32% with a 24% share price rise. Difficult year-on-year comparables, sudden growth in M&A activities, and pressurized gross margin have affected investor sentiment.
However, Wells Fargo analyst Michael Turrin is positive about Twilio’s prospects for the rest of 2021 as well as 2022, based on a few factors. (See Analysts’ Top Stocks on TipRanks)
Firstly, Twilio’s growth automation platform, Twilio Engage, expected to hit the market in the first quarter of 2022, looks encouraging. The platform is powered by its recently acquired customer-data startup Segment. Bolton believes that the automation platform will fortify Twilio’s Customer Engagement Platform (CEP) with the addition of “applications for marketing (Engage), sales (Frontline), and service (Flex).”
Moreover, Twilio’s launches of Trust Hub and Content APIs have created a compelling next-generation messaging platform that enables customers to monitor and manage messaging.
Other powerful line-ups that keep Turrin positive about Twilio include the Twilio Intelligence for Voice, Flex One & Flextensions, and Regional Twilio.
Turrin lowered his outlook on gross margins for the second half of 2021, as well as 2022, to account for the effect of high application-to-person messaging fees and stronger business from the lower-margin messaging segment.
However, Turrin is encouraged about Twilio’s longer-term prospects and expects modestly higher revenues from Twilio beyond 2022. The analyst credits his optimism to “incremental strength from the core messaging business and additional contributions from application services (notably Twilio’s Customer Engagement Platform).”
Turrin reiterated a Buy rating on the stock, with a price target of $525. The Wall Street analyst consensus is also optimistic about Twilio, with a Strong Buy rating based on 16 Buys and 2 Holds. The average Twilio price target of $464.69 indicates an upside potential of 30.28%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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