TWLO Stock Soars As Earnings & Sales Handily Beat Estimates

Twilio (NYSE: TWLO) has been a top performer on the stock market over the past year. The company is a communications platform-as-a-service (CPaaS) business. What that means is that it makes it easy for businesses to communicate with customers via channels like voice, text, chat, video, and email. TWLO stock soared in extended trading on Wednesday after the cloud communications company reported better than expected fourth-quarter results. For the quarter, Twilio reported revenue of $548.1 million, representing a 65% increase from a year ago. 

best cloud stocks (TWLO stock)

Prior to the earnings report, TWLO stock had endured a two-day dip, unwinding some notable gains in the process. That said, this name has been on fire over the past few quarters. Following such a massive rally, the strong quarterly report couldn’t come at a better time when the company’s stock price seems to be a little ahead of itself.

“Twilio’s 65% year-over-year total revenue growth in the fourth quarter continued the strength and momentum we saw throughout an outstanding year of results in which we delivered $1.76 billion in revenue,” said Jeff Lawson, Twilio’s Co-Founder and CEO. “These results reinforced that we are addressing a generational opportunity, and with our acquisition of Segment and strong traction with Flex, we are building the leading customer engagement platform to improve every interaction that businesses have with their customers.”

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Twilio’s Acquisitions Is Generating Value To Shareholders

Not long ago, Twilio completed its acquisition of Segment for $3.2 billion in stock. And investors have every reason to be optimistic. For the uninitiated, Segment is the world-leading customer data platform with tools to standardize data collection, unify user records, and route customer data. This allows businesses to make real-time decisions, accelerate growth, and deliver compelling user experiences.

The new synergy ties in perfectly with Twilio’s vision of creating the world’s leading customer engagement platform. The acquisition is evidently a catalyst for TWLO stock, reflected from the quarterly result reported yesterday. Segment brings more than 5,000 new customers with it and expands its new owner’s market opportunity by $17 billion. Clearly, Twilio is firing on all cylinders. Here’s why. 

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Twilio Is Made For Socially Distanced Life

From the most basic level, Twilio’s platform enables developers to build, scale and operate real-time communications within their software applications. Twilio’s software offers the power, flexibility, and reliability for businesses to build world-class engagement into their customer experience. 

From clients like Airbnb (NASDAQ: ABNB), Netflix (NASDAQ: NFLX) to eBay (NASDAQ: EBAY), Twilio’s product offerings have been keeping these notable companies operating smoothly. In a nutshell, Twilio’s SaaS allows consumers and enterprises to connect digitally. At a time when the pandemic increases the use of online services and tools, you can see how Twilio is benefitting. 

Twilio Stock (TWLO stock price)
Source: TD Ameritrade TOS

While Twilio is not the only player in town, its first-mover advantage helped. The company has been staying ahead of its rivals. Twilio’s platform provides more features in comparison with other platforms on the market, according to the research firm IDC. Thanks to that, Twilio have managed to generate strong customer and revenue growth.

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TWLO Sits In The Epicenter Of The API Economy

In essence, as we are turning into an economy where everything is built on software, communication APIs are becoming increasingly relevant. What is an API, you ask? API is short for application programming interfaces. We can say that communication APIs are little blocks of code that allow communication between different software to take place. Simply put, it allows computers to communicate with another computer. For example, communication APIs are what allow Uber (NYSE: UBER) to send you texts when your ride is here, or Deliveroo to send you a notification when your food has arrived. 

The company has developed a suite of best-in-class APIs for enabling text-based business-to-consumer (B2C) communications. As most businesses would want to communicate with their clients seamlessly regardless of their phone’s software or version, Twilio’s tools are what many top companies would opt for. Some say this sort of text-based B2C communication is the future. And Twilio’s API does just that. For this reason, many analysts believe the company could continue to capitalize on this niche for growth in this decade.

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The Rise In Cryptocurrencies Could Play A Factor In TWLO Stock

Twilio has played a big part in delivering strong two-factor authentication for crypto exchanges like Coinbase, Uphold, Bitwage, BitGo, and many others in the cryptocurrency space for years. With the meteoric rise of Bitcoin, the demand for security couldn’t be more pronounced. The increased demand for cryptocurrency investments necessitates enhanced security protocols. Currently, the standard for access authorization is two-factor authentication or 2FA. For those unfamiliar, 2FA allows users to have an additional layer of protection beyond a password for account verification and protection.

What’s more, Twilio’s 2FA is probably the top dog in the industry as it provides recovery mechanisms in case something happens to the primary 2FA-armed device. As the cryptocurrency narrative becomes mainstream, the critical importance of this functionality could give TWLO stock another boost.

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Bottom Line On TWLO Stock

As the building blocks of modern communication, it is no surprise that Twilio is a long-term winner in its space. And we have certainly seen that in TWLO stock. The company’s revenue growth looks to be stellar as long as enterprises continue to move their operations to the cloud. Whether or not TWLO stock could continue to rain money into your portfolio is another question. After all, with today’s gains, the stock is only going to become increasingly unaffordable.

With all that in mind, valuation concerns aside, global digitization should continue to be a strong tailwind for the company. For businesses to remain relevant and stay ahead of the game, enterprises will need to prioritize effective customer engagement, and Twilio’s platform makes that possible. If you have a long time horizon, there is every chance that TWLO stock will grow into its valuation, and then some.

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