Here's Why Twilio Could See 30% Revenue Growth

Twilio Inc TWLO faces a large and attractive market opportunity and has multiple growth drivers, William Blair’s Bhavan Suri said in a report. He initiated coverage of the company with an Outperform rating.

Twilio currently has more than 28,000 customer accounts and over 1 million developer accounts registered on its platform. The company’s platform-based approach creates multiple channels of growth, as an increasing number of applications are built on the platform. This allows Twilio to “expand without meaningful incremental sales-and-marketing investment,” analyst Bhavan Suri mentioned.

Market Opportunity

The market for embedded communications solutions is both large and growing. Twilio’s total addressable market size is estimated at about $11 billion, which implies that the company has penetrated merely about 2 percent of the market, Suri stated.

Related Link: JPMorgan Initiates Twilio Neutral With 11x Forward EV/EBITDA Valuation

He added, “We believe the increasing demand for embedded communications capabilities should allow the company to maintain a long runway for growth.”

Multiple Growth Drivers

The analyst expects Twilio to be able to sustain revenue growth of more than 30 percent over the next few years, since there are multiple growth drivers, such as:

1. The company is likely to continue adding new logos and expanding usage with existing customers
2. Twilio continues to invest in R&D to improve its platform and add new features and functionality, which should help boost ASPs.
3. The company is focused on expanding internationally, which currently accounts for merely 15 percent of total revenue.
4. Twilio is investing to target the enterprise market, which should allow for higher revenue commitment contracts.

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