Oppenheimer Sees Twilio As The Next $10-Billion Company

According to Kidron, Twilio is a leading Communications Platform-as-a-Service (CPaaS) vendor and the company is well positioned for several reasons, including:

1. Enterprises are rushing to adopt A2P communication in modern and legacy applications.
2. A2P communication will increasingly be adopted through cloud-based platforms.
3. The CPaaS market is large and rapidly growing.
4. Twilio can continue leveraging a successful developer-focused land-and-expand sales model, penetrate traditional enterprise and expand internationally.

Twilio is a recent IPO and shares began trading for the first time in late June.

Kidron further noted that these four factors will allow Twilio to achieve strong growth for the foreseeable future. While the analyst did acknowledge that Twilio's stock seems expensive, it is actually undervalued compared to past high-growth peers.

Kidron expanded and noted that his $50 price target is based on an 8.6 multiple on EV/sales on his 2018 estimates and a view that the Street's expectations notably underestimate the company's growth trajectory. Moreover, shares are trading at 6.0x EV/Sales on his 2018 versus the peer group's average of 5.2x, high-growth peers previously traded at an average multiple as high as 14.4x at a similar revenue level and stage of development.

This also explains why the analyst believes that shares should be valued at $10 billion, compared to its valuation of just $2.78 billion as of Monday.

At last check in Tuesday's pre-market, Twilio was up 2.87 percent at $35.10.