Shares of Twilio (NYSE:TWLO) soared on Friday. The stock finished the trading day up 13%. The cloud-based communication platform provider's stock benefited from a wave of optimistic analyst reports on the company.
What has Twilio analysts so excited about this growth stock? The company's investor presentation on Thursday included a number of optimistic updates from management. Here's a look at some of the key takeaways from Twilio's investor presentation and what analysts are saying about it.
Twilio is just getting started
Since Twilio's last investor day in 2017, the company's quarterly revenue has risen from $115 million to more than $401 million. Similarly, the company's active customers have soared from 49,000 to over 200,000. You'd think investors getting in on Twilio now have missed most of the company's underlying growth story. But management's 2020 presentation indicated otherwise.
Over the next four years, Twilio expects year-over-year organic revenue growth rates to exceed 30% annually. In addition, over the "long-term" the company expects its non-GAAP gross margin to expand from 56% in the company's second quarter of 2020 to between 60% and 65%. Finally, management believes its non-GAAP operating margin will widen from 2% in Q2 to greater than 20% four years from now.
Putting these assumptions together, if Twilio grew its revenue at an average rate of 35% annually over the next for years and achieve a 20% net margin on that revenue, the company would have annual operating income of more than $900 million on about $4.6 billion of revenue.
What analysts are saying
In total, seven analysts have already raised their price target for Twilio stock following the company's investor day presentation. Furthermore, the average of these new 12-month targets is $336, representing 16% upside from where the stock traded after its huge run-up on Friday.
Mizuho analyst Siti Panigrahi, who reiterated a buy rating on the stock and maintained a $315 12-month price target pointed out that most analysts were expecting Twilio's organic revenue growth to compound at a rate of about 23% to 25% annually over the next five years. Management's guidance for 30%-plus growth, therefore, blows this out of the water.
Cowen analyst Derrick Wood, who increased his price target on the stock from $310 to $350, said he believes the company has underappreciated growth potential, making Twilio stock his top pick.
One final analyst's view worth highlighting is Baird analyst William Power's. Supporting his $340 price target, up from $315 previously, is his view that the company is well-positioned to continue benefiting from organizations' ongoing digital transformations.
While investors should be sure to do their own due diligence and should never rely solely on an analyst's opinion, Twilio management's confidence at its investor day presentation certainly did make the long-term outlook for the company look brighter.