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Twilio (TWLO): 2019 Top Picks' Mid-Year Update
07/15/2019 5:00 am EST
The cloud-based subscription recurring revenue model within the greater software industry is quite possibly the hottest sector of the stock market.
There are variations of how this business model is applied to targeted customers that are literally changing the way businesses and individuals operate, but one thing is for sure, it’s a model that when executed properly is producing amazing results coupled with high-resolution visibility for future top and bottom-line growth prospects.
One of the most exciting areas of explosive growth in technology has to do with what is known as Communications Platform as a Service (CPaaS). In short, CPaaS is a cloud-based platform that enables developers to add real-time communications features to their own applications without needing to build backend infrastructures or interfaces.
It’s a mouthful, but for those millions of software developers around the world that are building robust websites that include everything from R&D to ecommerce, CPaaS is today’s essential toolbox for innovative communications between businesses and customers.
Twilio is arguably the most exciting company in the CPaaS space. The company provides a proprietary set of application programming interfaces that enable developers to embed voice, messaging and video capabilities to their applications.
Twilio’s tools connect IoT devices to global cellular networks, power WhatsApp messaging services, provide login security for online accounts and transactions and streamline workforce operations and customer service.
Thanks to its swelling base of high-profile clients, Twilio is enjoying a phenomenal start to 2019. Q1 total revenue of $233.1 million was up 81% year-over-year. The acquisition of SendGrid to optimize email was strategically astute in bringing a complete communications bundle to current and prospective customers.
The company grew its customer base to 154,7097 accounts from 53,985 accounts as of Q1 2018 and raised revenue guidance for Q2 from $253.5 million to $264 million.
On June 18, Needham initiated coverage of Twilio with a buy rating and a $165 price target. At its current price of $140, that’s about 18% potential upside, which might not sound dramatic from its current level, but the stock began the year at $90.
So, being up 55% year-to-date with what I view as a very achievable $165 target by Christmas, investors that bought on this recommendation could end the year up by around 75%. It’s a great stock to own. It’s a great stock to trade. It’s just a great stock!
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