Twilio (TWLO) benefited immensely last year as the pivot to digital services got accelerated by the coronavirus.
In tandem with revenue increasing in each successive quarter, the messaging platform’s stock soared to new heights, reaching its apex in February. As has happened to many tech high-flyers, the shares have pulled back since. However, heading into today’s Q1 earnings (Wed May 5, AMC), Monness analyst Brian White thinks that valuation remains a sticking point.
“Given the severity and length of this COVID-19 crisis, the stars aligned well for Twilio over the past year with fundamental trends rebounding sharply from the lackluster performance experienced in 2019, driving investor sentiment and the stock price to new heights,” the 5-star analyst noted. “That said, valuation is not for the faint of heart.”
Interestingly, though, White actually thinks the Street’s estimate bar for the quarter is set far too low, and the analyst thinks the company will have no problem beating the forecasts.
The Street is calling for revenue of $534.9 million, but White anticipates Twilio will “at least meet” his Q1 revenue forecast of $583.0 million. White’s estimate amounts to a 60% year-over-year increase, and 6% growth on the prior quarter. This is below the four-year average of an 11% uptick for past March quarters and also lower than the 10% quarter-over-quarter rise displayed in 1Q20.
“By comparison,” White notes, “The Street’s 1Q:21 revenue projection reflects a 2% QoQ decline, representing not only the lowest sequential growth for a March quarter that we have on record for Twilio but the lowest sequential growth of any quarter reported by the company in our model (through 2014), which we believe defies logic in the current environment of accelerated digital transformation.”
White’s EPS projection of $0.05 is more optimistic that the Street’s, too, which has Twilio reporting a loss per share of $0.10.
Looking ahead into 2Q21, White once more thinks the consensus estimate is “unrealistically low.”
White expects revenue to increase by 57% year-over-year to $630.0 million while the Street has $579.3 million. The analyst calls for EPS of $0.11 vs. the consensus estimate of a loss per share of $0.06.
Despite expecting handsome beats across the board, for now, White remains on the sidelines with a Neutral (i.e., Hold) rating and no fixed price target in mind. (To watch White’s track record, click here)
White’s take stands out on Wall Street. One other analyst remains on the fence, but all 22 other recent reviews say Buy. The stock, therefore, has a Strong Buy consensus rating, backed by a $505.27 average price target, which implies 48% upside over the coming months. (See Twilio stock analysis on TipRanks)
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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.