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The growth estimates for Twilio Inc (NYSE:TWLO) hold significant downside risk over the next two to four quarters given that its revenue is directly tied to traffic volumes, according to Piper Sandler.
The Twilio Analyst
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Brent Bracelin downgraded Twilio from Overweight to Neutral and cut the price target from $151 to $90.
The Twilio Thesis
Although Twilio has direct-to-consumer tailwinds that could potentially grow its revenue to over $2 billion in the next five years, its usage-based revenue model elevates near-term disruption risk, Bracelin said in the Tuesday downgrade note. (See his track record here.)
Twilio’s revenue recognition model is tied directly to traffic volumes for messaging, voice, email and authentication, the analyst said. The user-based revenue model, combined with exposure to some of the largest digital natives, like Uber Technologies Inc (NYSE:UBER), LYFT Inc (NASDAQ:LYFT), Lime, eBay Inc (NASDAQ:EBAY) and Shopify Inc (NYSE:SHOP), means that the company’s growth trajectory could be severely hit by the COVID-19 pandemic, he said.
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Piper Sandler lowered its growth estimates for 2020 from 31% to 10%.
Twilio does have a strong balance sheet, with net cash of $1.3 billion and a cash burn rate that is unlikely to exceed $90 million annually, “giving it a multi-year run-way to further invest in a market-leading cloud franchise,” Bracelin said.
TWLO Price Action
Twilio shares were down 3.1% at $93.97 at the time of publication Tuesday.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.