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4 Reasons Why DA Davidson Is Bullish On Twilio

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4 Reasons Why DA Davidson Is Bullish On Twilio

Cloud communication provider Twilio Inc (NYSE: TWLO) is considered a leader within the communications-platform-as-a-service space and is becoming an increasingly vital component for companies to build mobile applications, according to D.A. Davidson.

The Analyst

D.A. Davidson's Rishi Jaluria initiated coverage of Twilio with a Buy rating and $99 price target.

The Thesis

The bullish case for Twilio is fourfold, Jaluria said in the Tuesday initiation note. (See his track record here.)

  • The CPaaS industry is growing in importance, and firsthand checks indicate Twilio boasts a "significant mindshare" among developers and next-generation companies, the analyst said. 
  • Twilio's developer-centric model focuses on product development and reliability, Jaluria said. As a result, the company can spend more on research and development and less on sales and marketing compared to its competitors, he said.
  • Twilio's financials are impressive and highlighted by total revenue growing at a compounded annual growth rate of 68 percent from 2013 to 2017, while base revenue grew at a 72-percent CAGR over the same time period, the analyst said.
  • Finally, the company's operating leverage looks impressive given a 4,900-basis point improvement in operating margin from 2013 to 2017, Jaluria said. The momentum has legs, the analyst said, adding that Twilio should be able to show investors a non-GAAP profit and become free cash flow positive this year.

The $84 level Twilio shares were trading near Tuesday implies an 8.2 times multiple on EV/2020 estimated revenue, Jaluria said. D.A. Davidson's $99 price target is based on a 9.8 times multiple, which is a premium to peers, yet warranted given the company's leadership position and higher growth rates, the sell-side firm said.

Price Action

Twilio shares were trading higher by more than 1 percent to $80.38.

Related Links:

A Look At Twilio's Huge Quarter

KeyBanc: 5 Reasons To Be Aggressive On Twilio

Latest Ratings for TWLO

DateFirmActionFromTo
May 2019MaintainsBuyBuy
May 2019MaintainsBuyBuy
May 2019MaintainsMarket OutperformMarket Outperform

View More Analyst Ratings for TWLO
View the Latest Analyst Ratings

Posted-In: cloud CPaaS DA DavidsonAnalyst Color Price Target Initiation Top Stories Analyst Ratings Best of Benzinga

 

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