It's been a year to remember for Twilio Inc. (NYSE: TWLO) investors. The provider of in-app communications solutions raced higher last month after posting strong quarterly results. The latest step up came on Thursday when Bank of America Merrill Lynch initiated coverage of the stock with a bullish buy rating. Shares of the market darling rose 11.4% last week, soaring 62% so far in 2018, as of Monday's close.
Nikolay Beliov at BofA/Merrill feels that the easy implementation of Twilio's growing suite of communication tools gives it an advantage over the competition; its developer focus finds it in the right place at the right time, as apps become more functional and interactive. The analyst sees a clear path to $1 billion in revenue by 2021, a 150% advance from last year's top-line showing. He is slapping the stock with a $45 price target, suggesting another 18% of upside from current levels.
Making the right connection
Twilio shares were already basking from the blowout quarter it put out two weeks before Beliov's bullish initiation. Revenue grew 40% to $105.3 million in the fourth quarter, topping even the high end of its earlier guidance. The adjusted deficit of $0.03 a share was roughly half of the red ink that it was previously targeting for the period.
Twilio is clicking with developers who require real-time communication with their app users. Tools that seamlessly connect Lyft drivers with their passengers or reset social-media account passwords aren't easy lifts to tackle in-house, and Twilio is there with a murderers' row of app giants that rely on its growing platform. The number of developers on Twilio's rolls has grown from 34,457 to 48,979 over the past year.
Last week's new analyst call was enough to lift the stock to fresh 52-week highs, and Twilio is kicking off this week with another new high on Monday. There are no longer concerns that it's leaning too heavily on Uber and WhatsApp to drive its performance, something that became critical when Uber started kicking the tires of Twilio rivals for some of its functions. Uber's absence is still leaving a dent, as base revenue would've shot 62% higher without Uber. But that's another reason why the market's getting excited about Twilio, as it relies less on the leading ride-sharing service; Uber now accounts for just 5% of its business.
Twilio's rolling, and even a regulatory filing last week -- disclosing that it spotted a material weakness in its internal controls, related to the tracking of qualifying internal-use software development costs eligible for capitalization -- failed to hold the stock back. Twilio is still trading far below the all-time highs it hit two summers ago shortly after going public, but momentum is on its side again. Twilio is one of this year's hottest stocks.
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