Twilio (NYSE: TWLO) It set the stock market on fire in the first half of 2020 despite having made a tentative start due to the dire final guidance that left investors panicking in February.
The new coronavirus pandemic appears to have given the cloud communications specialist an opportunity as it provides a service that enables organizations to maintain their contact center operations remotely. So when Twilio released its first-quarter report for fiscal year 2020, its earnings of $ 0.06 per share exceeded the Wall Street estimate that demanded a loss of $ 0.11 per share.
That impressive performance and signs of a substantial increase in Twilio’s business following the COVID-19 outbreak have led to a recovery in the stock market. But has Twilio run too far too soon? Will it be able to generate enough growth in the coming quarters to maintain its excellent momentum? Let’s find out.
TWLO data by YCharts
Addressing the elephant in the room
Twilio has raised investor expectations after its first-quarter report released in early May. A large portion of stock earnings have been recorded in the past few months after the release of the first quarter earnings report, as evidenced in the chart above.
This indicates that Twilio will have to continue crushing expectations in the coming quarters to maintain his great career. The good news is that the company expects its second-quarter revenue to rise 34% annually at the midpoint of its targeting range of $ 365 million to $ 370 million. Wall Street would have settled for $ 336.9 million in revenue this quarter.
Twilio saw a 25% increase in daily enrollment activity in the last two weeks of the quarter compared to the first 11 weeks, as the pandemic forced governments to impose lockouts and issue shelter orders at home. However, corporations had to deal with customer inquiries, and that’s where Twilio’s deals came in.
Twilio CEO Jeff Lawson provided an example of how this has worked in the company’s favor over the previous earnings conference call held in May:
Over the course of a few weeks, developers of Comcast It integrated Twilio Voice into its local customer database, allowing technicians and customer support to contact customers for service requests remotely. They also launched a pilot to incorporate Twilio Video into the same database, which could allow a customer to use the camera on their phone to show a Comcast technician their settings and the technician can guide them through self-diagnosis and repair without never step on. in her house
This was one of many examples of organizations that accelerated their move to a cloud-based contact center platform in the wake of the pandemic. And this transition may not slow down anytime soon, as the recent surge in the number of infections in the US and around the world could lead to a slower reopening of business or the imposition of tighter locks.
As a result, organizations will have to move their contact center operations to the cloud so that customer service associates can work from home.
Call center software provider NICE inContact recently surveyed nearly 800 contact center decision makers in the US, Canada, UK, and Australia. The results revealed that 66% of respondents seek to accelerate the move to cloud-based contact centers. Additionally, 70% of respondents plan to follow a work-from-home model for their customer service associates, even after the pandemic ends.
That’s not surprising, since the costs of setting up a cloud-based contact center are substantially lower than operating a physical one, while the operating costs also remain low, as the organization doesn’t need to invest in a lot of hardware or space. of office.
Image source: Getty Images.
What should investors do?
Altogether, it won’t be surprising to see Twilio attract more customers and get more business than there are. In the first quarter, the company had 190,000 active customer accounts, an increase of 23% over the prior year period.
More importantly, Twilio’s dollar-based net expansion rate stood at 143% during the quarter, a small increase of one percentage point over the prior year period. This metric is an important indicator of Twilio’s future growth, as an increase in it indicates that its existing customers are spending more money on its offerings.
The company explains that the metric “increases when such active customer accounts increase the use of a product, extend their use of a product to new applications, or adopt a new product.” This trend of increased spending by Twilio’s customers and expansion of its customer base can be expected to continue if the accelerated transition to the cloud is actually happening.
As such, investors holding Twilio should continue to ride the salsa train, although they should be aware that any sign of a slowdown in the company’s growth could lead to panic selling due to its massive profits. As for someone who has missed the trip so far, they will have to pay a rich premium since Twilio is trading at 25 times sales.
This is not surprising, as the cloud communications specialist is generating substantial growth at a time when many companies are struggling due to the pandemic, but it could be worth it if the growth trajectory continues.
