Twilio Likely to See 'Strong Growth,' Oppenheimer Says

Twilio 'seems likely to experience strong growth for the foreseeable future,' says an analyst at Oppenheimer.
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Twilio (TWLO) - Get Report "seems likely to experience strong growth for the foreseeable future," said an analyst from Oppenheimer who maintains an outperform rating on shares of the cloud communications company.

Shares closed up 3.8% on Monday and were up slightly to $107.80 in premarket trading.

"Twilio remains one of our top picks for 2020," said Ittai Kidron, who also has a price target of $145 a share on the stock of the San Francisco-based company. 

Kidron said in a note to investors that his bullish stance is based on several factors, including revenue synergies from the $2 billion acquisition of email marketing platform SendGrid in October. He also sees contribution from new growth verticals such as Flex, Marketing, and Conversations.

"Initial SendGrid synergies have primarily been achieved from selling SendGrid into Twilio's base," Kidron wrote. "With initial buildout activities (sales training, channel buildout) progressing well, we see cross-selling upside in CY20 as Twilio begins to push its solutions into SendGrid's installed base."

Kidron also said he thought it was unlikely that there would a material downside from the recently enacted Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act, which requires telephone companies to use call authentication technology.

Twilio seems likely to experience strong growth for the foreseeable future, Kidron wrote, as it benefits from: 1) rapid adoption of application-to-person (A2P) communication in modern and legacy applications; 2) cloud-based platforms becoming the primary way by which applications incorporate A2P communication; 3) a large and growing TAM as the range of A2P communication expands (voice, SMS, video, etc.); and 4) leveraging its successful developer-focused, land-and-expand sales mode.

"While we still see some near-term complexities (tough comps, new pro forma expansion rate, robocalling acts) through 1H20, we expect tailwinds (easier comps, US Presidential election) to re-emerge in 2H20," he said.

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