Twilio Stock: Next Stop, $36?

By Rick Munarriz Markets Fool.com

Twilio(NYSE: TWLO)has been one of tech's more volatile investments since going public at $15 less than a year ago, and at least one analyst feels that the stock's next move will be higher. Mark Murphy at JPMorgan upgraded Twilio on Friday, taking his rating from neutral to overweight.

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Twilio stock has been a bucking bronco. It more than quadrupled at one point last year, briefly topping $70 three months after its Wall Street debut. The in-app communications specialist has now seen its stock fall to the high $20s, closing at $26.93 on Thursday. Murphy feels that the current price is too low. He's sticking to his earlier price target of $36, a goal that finds him opportunistically bullish now that the stock is approaching its lowest levels since last summer's IPO.

Image source: Twilio.

Apps as a main course

JPMorgan's Murphy argues that the stock is cheap here. The analyst feels that the stock deserves a healthier premium to its peer group of cloud companies, and that's not reflected in the current price. Twilio may have a niche speciality -- giving developers a seamless way to embedtext messaging, voice chat, and video capabilities directly within their apps -- but it's the undisputed leader in this gargantuan addressable market.Twilio closed out last year with 36,606 active customers, and it's merely scratching the surface as the mobile revolution continues to play out.

Murphy also had some comforting words to offer onAmazon(NASDAQ: AMZN)as it pertains to Twilio. He views the leading online retailer as a partner instead of a competitor.

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It seems that a lot of the time that Twilio's making headlines that it's somehow tied to the leading online retailer. Last week it was Twilio announcing support for Amazon Connect, Amazon Web Services' new cloud-based contact center. Some may see this as Amazon beefing up its cloud-hosting platform to make it easier to perform Twilio-like functionality, but Amazon itself keeps expanding its relationship with Twilio as it did late last year. Amazon would be more likely to acquire Twilio than to compete against it, and it's probably worth noting that Twilio itself is built and deployed on Amazon's AWS platform.

Twilio bulls don't get "I told you so" bragging rights here. Murphy sticking to his same price target says more about the market opportunity given the stock's recent weakness than any perceived improvement in Twilio's fundamentals. However, it's still a good sign that Murphy's price target didn't move lower along with the stock. It's a bull conversion on a technicality, but those long Twilio may as well take it.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Twilio. The Motley Fool has a disclosure policy.