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Twilio is the YF+ investment idea of the day

Yahoo Finance's Jared Blikre discusses a bullish call on Twilio, which is the Yahoo Finance Plus investment idea of the day.

Video Transcript

KARINA MITCHELL: With much more on what's moving markets, let's bring in our Yahoo Finance's Jared Blikre. And it is a big day for tech stocks. NVIDIA and AMD leading the chipmaker rally. And Intel says it's poised to buy Tower Semi.

JARED BLIKRE: That's right, a rather small company, given the size of some of these others. In the lower right-hand corner, Tower Semi is up 41%. This is over the last two days. And you can see that year-to-date, it had been underwater. Now it's up 18%. This is a $5.4 billion deal. Intel would be paying $53 per share. You might notice it's still $6 off of the price there.

Part of that could be that the companies have to go through antitrust negotiations with some of the countries, namely China. So we'll have to see if that comes to fruition. Here's Intel. That stock up 1% today, still underwater for the year. And if you take a look at the prior year, you can see we're off 22%. But in fact, if you go to a three-year view, you can see just chopping around for a long time in this trading range.

And I do have some commentary on this. This is from Bloomberg Intelligence, saying that with the deal, Intel may widen its manufacturing scale and variety, we believe, while offering US-based capacity to its customers and counterbalance dependence on East Asian specialty foundries. And then Morgan Stanley, which rates the stock an equal weight with a price target of $55, about $7 above the current price, saying, acquiring this foundry competency, even at relatively small scale, would change the narrative of Intel's foundry strategy for the better.

A contrary opinion here, though, Bernstein, which rates the stock an underperform with a price target of $48 under, spending this much to obtain further foundry and specialty expertise and some geographically favorable incremental capacity seems unlikely to hurt much. However, we're not sure why going after a subscale, margin dilutive, analog fabber is all that attractive. So, interesting to read these conflicting reports there, different opinions. History will have to decide.

And also want to check out some of the leaders here. AMD up 5%, as you mentioned. Just acquired Xilinx, closed that transaction only yesterday. And then Nvidia up 8% ahead of its earnings, which we're going to be bringing to you tomorrow after the bell.

ALEXIS CHRISTOFOROUS: All right, want to switch gears and talk Avis. I know that stock is getting hit pretty hard today, Jared. They have pretty good earnings, right? I mean, there was a beat at least on the top line, but I guess investors are upset about these revenue per day numbers and also their rental fleet metrics.

JARED BLIKRE: That's right, and let me just take a look. Let's take a look at this board. You can see, this is a travel and reopening board, and lots of green on the screen. The one exception is Avis Budget Group. And this is over the last three years. Let me dial this down to a three-month chart. This is coming off that incredible peak that we saw last year, down 38% over these last three months. This has been a very volatile stock, so not surprising to see it down 12% today on a little bit of disappointment. Here's what the Street is saying.

JPMorgan is saying-- which rates the stock at neutral-- said that Avis's commercial travel in the fourth quarter was higher versus the fourth quarter in 2019, as corporate travelers are taking longer trips than before. Analysts saying that is leading to less rich leisure corporate mix and therefore pressuring revenue per day. That's what you were talking about, Alexis. Avis is more likely taking share in this segment, exacerbating the impact-- excuse me.

Also, a couple of words from Deutsche Bank. They're saying that it was a, quote, "solid quarter." CAR delivered another top and bottom line beat versus consensus, though some bulls will likely view it as an imperfect quarter in light of an expanded US fleet. So let's take a longer term view because over the last three years, we can see still sitting on gains of nearly 500%. A quasi meme stock, you could say. It got caught up in a huge short squeeze over here back in late 2021. So we'll have to see what comes of this particular company amid all this green that we see, thankfully, on our travel heat map.

KARINA MITCHELL: OK, and then Jared, Yahoo Finance's Plus Investment Idea of the Day is a bullish call on Twilio after reporting a favorable outlook in its most recent earnings announcement.

JARED BLIKRE: That's right, and as you can see, Twilio has been under pressure, down 55% over the last year. However, Argus Research writing today, they do like the call. And in fact, they see a longer term target of $320. They're saying big revenue beat against expectations, reiterating buy. Twilio edged up, following a big upside revenue surprise for the fourth quarter and guiding for stronger organic revenue growth going forward. They posted a 60% plus revenue growth in 2021, but they're less concerned with pleasing Wall Street with short-term profits.

Dollar-based net expansion rate, a measure of increased spending by existing customers, was 131% for the full year of 2021, indicating a strong customer retention and engagement. Twilio shares have come off sharply off peak prices-- that's what we were just looking at-- due to willingness to cooperate or to operate at a non-GAAP loss, while pursuing longer term growth. We see an opportunity for investors to initiate or dollar average into positions in a digital enabler with solid growth prospects in coming years. So as it comes down to, it's a value play, guys.