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Why You Should Keep Twilio (TWLO) Stock in Your Portfolio

Zacks Equity Research

Twilio TWLO has been one of the outstanding performers in the software space last year. The stock has skyrocketed 238.5%, outperforming the industry’s growth of 0.8%.

The company boasts an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four reported quarters, the average being 123.22%. Twilio also recorded significant top- and bottom-line year-over-year growth in these quarters.

The Zacks Consensus Estimate for 2018 earnings has increased from 3 cents to 11 cents over the past 60 days. With an expected long-term earnings per share growth rate of 9% and a market cap of $8.9 billion, the stock seems to be a bet to reckon with for investors, who need to retain it in their portfolio if looking to reap long-term gains.

What’s Driving the Stock?

Twilio’s growing initiatives to further strengthen its foothold as a strategic software platform for customer engagement, and also to emerge as developers' first choice for communications are noteworthy.

Being a provider of cloud communications platforms to corporations, Twilio is the missing link between businesses and the cloud. Additionally, as more and more companies are shifting gears tothe cloud, Twilio looks poised to ride the growth trend over the long run.

The company is benefiting from its continued focus on introducing products and its go-to-market sales strategy. Solid growth in the company’s core voice and messaging products is a key driver.

Rapid adoption of application-to-person (A2P) communication is helping it expand its total addressable market. Robust expansion within the existing customer base and also first-time deals with new clients make us optimistic about the company’s growth prospects. Notably, in the last reported quarter, a number of Twilio Flex contracts signed lent a further impetus to the company’s Engagement Cloud strategy.

Moreover, in a bid to fortify its platform, Twilio has made a couple of selective acquisitions. With the latest acquisition of SendGrid, Twilio aims to strengthen its onmichannel communications capabilities by enhancing its Programmable Communications Cloud software, which allows developers to embed voice, messaging, video and authentication skills.

Last September, the company bought its long-term business partner Ytica as part of efforts to improve its customer service application platform, Twilio Flex. With this buyout, the company expects to provide an operational and analytical edge to Twilio Flex’s customer service solution. Ytica’s sound analytics and workforce optimization expertise will benefit the company substantially in the long haul.

Twilio Inc. Price and EPS Surprise

Twilio Inc. Price and EPS Surprise | Twilio Inc. Quote

Zacks Rank and Stocks to Consider

Currently, Twilio has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Computer and Technology sector are Synopsys, Inc.SNPS, eGain EGAN and Verint Systems Inc. VRNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Synopsys, eGain and Verint is projected to be 10%, 30% and 10%, respectively.

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