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Analyst: Buy The Twilio Dip

Wayne Duggan

Twilio Inc (NYSE: TWLO) shares have gotten hammered of late, dropping 21.8% in the past three months.

One Wall Street analyst said Monday that investors shouldn’t get too hung up on near-term issues and lose sight of the longer-term opportunity in Twilio.

The Analyst

Bank of America Merrill Lynch analyst Nikolay Beliov reiterated a Buy rating on Twilio with a $160 price target.

The Thesis

The recent sell-off has pushed Twilio’s year-to-date returns in-line with the Nasdaq, even though Twilio has been a market leader in performance, growing base revenue by 50% year-to-date, Beliov said in a Monday note. (See his track record here.) 

Investors have been taking profits in Twilio based on concerns about slowing revenue growth in 2020, the perceived negative impact of robo-calling and a slower-than-expected ramp in Flex, the analyst said. 

While revenue growth will naturally slow down as Twilio achieves scale, Flex should provide the foundation for a healthy growth rate in coming years, he said. 

Beliov is also bullish on Conversations API, which he estimates will add between $30 million and $90 million to 2021 revenue.

“In our view, TWLO is out-innovating everybody and staying not just one step ahead, but many steps ahead — look at TaskRouter, Flex and now Verify and Conversations.” 

The fact that Twilio is approaching $2 billion in revenue and is the clear market leader in a large addressable market makes the recent sell-off in the stock a long-term buying opportunity, according to BofA. 

The stock was trading 1.59% higher at $108.25 at the time of publication Monday. 

Benzinga’s Take

The fact that even after the sell-off Twilio is still trading at 17.1 times sales and 339 times forward earnings means long-term investors will have to weigh the stock’s steep valuation with its long-term growth potential.

While that growth story plays out, it wouldn’t be surprising to see more large swings in the stock like the ones that have occured in 2019.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

Analyst: 'Short Squeeze Is Possible' In Twilio

Analysts React To Heavy Selling Pressure In The Tech Sector

Latest Ratings for TWLO

Date Firm Action From To
Sep 2019 Upgrades Equal-Weight Overweight
Aug 2019 Maintains Overweight
Jun 2019 Initiates Coverage On Buy

View More Analyst Ratings for TWLO
View the Latest Analyst Ratings

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