Here's Why Investors Should Retain Twilio (TWLO) Stock Now
A majority of tech stocks have seen a drastic fall in their year-to-date (“YTD”) share prices amid the broader market sell-off. Twilio TWLO is a perfect example in this case, shares of which have plunged 65.6% so far this year, despite reporting consecutive quarters of better-than-expected results.
Twilio has a solid surprise history as it beat earnings estimates in the last four reported quarters, with the average being 58.2%. Moreover, the company’s revenues have grown more than four times in the last three years to $2.84 billion in 2021 from $650 million in 2018.
Though TWLO has fallen out of favor among investors, we consider that it is wise to continue holding the stock for long-term gains, given the strength of its fundamentals and solid prospects.
Twilio Inc. Price and Consensus
Twilio Inc. price-consensus-chart | Twilio Inc. Quote
Why Hold TWLO Stock?
Twilio has been gaining from the accelerated digital transformation by companies amid the pandemic-led remote working and online learning wave. The company’s selective acquisitions and strategic investments in businesses and technologies have been boosting its product portfolio and fortifying its global presence.
With its sustained focus on launching new innovative products along with strategic acquisitions, such as Sendgrid and Segment, the company has been able to rapidly add more customers and expand its global footprint.
Twilio continues to witness the growing demand for its products and solutions from the health care, education, retail and crisis management organizations. Its efforts toward expanding the global footprint are commendable. With the buyout of Zipwhip in 2021, the company enhanced its customer engagement capabilities and broadened global reach.
We believe that the company's new product line comprising Twilio Pay and Autopilot, which is seeing solid acceptance, will help it expand the market share in the days ahead.
Per a recent Expert Market Research report, the global Application-to-Person SMS market is anticipated to reach $79.3 billion by 2027 from $64.5 billion in 2021, indicating a CAGR of 3.5% from 2022 to 2027.
Thus, Twilio’s primary business of Programmable messaging is likely to witness tremendous growth in the days ahead. We believe that with a sustained focus on developing products and a global expansion plan, TWLO is well-poised to tap prospects.
However, Twilio’s profitability is likely to remain under pressure in the near term due to increased spending and investments in enhancing the product portfolio and expanding across new markets. Also, elevated expenses toward enhancing sales capabilities might hurt profits.
Zacks Rank & Stocks to Consider
Currently, Twilio carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering from the broader technology sector are Broadcom AVGO, Synopsys SNPS and CrowdStrike CRWD. Broadcom and Synopsys each sport a Zacks Rank #1 (Strong Buy), while CrowdStrike carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Broadcom's third-quarter fiscal 2022 earnings has been revised upward by 9.9% to $9.62 per share over the past 60 days. For fiscal 2022, the Zacks Consensus Estimate for Broadcom's earnings has moved north by seven cents to $37.03 per share in the past 60 days.
Broadcom's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 2.2%. Shares of AVGO have plunged 28.4% YTD.
The Zacks Consensus Estimate for Synopsys' third-quarter fiscal 2022 earnings has been revised upward by 25.3% to $1.93 per share over the past 60 days. For fiscal 2022, earnings estimates have moved north by 7.2% to $8.47 per share in the past 60 days.
Synopsys' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 2.7%. Shares of SNPS have decreased 17.8% YTD.
The Zacks Consensus Estimate for CrowdStrike's second-quarter fiscal 2023 earnings has been revised upward by three cents to 29 cents per share in the past 60 days. For fiscal 2023, earnings estimates have moved north by 11 cents to $1.23 per share in the past 60 days.
CrowdStrike's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 44.3%. Shares of CRWD have plunged 8.7% YTD.
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