Oppenheimer Starts Twilio (TWLO) at Outperform; Potential Still Undervalued, Says Analyst
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(Updated - November 1, 2016 9:28 AM EDT)
Oppenheimer initiated coverage on Twilio (NYSE: TWLO) with an Outperform rating and a price target of $50. Analyst Ittai Kidron said while shares appear expensive, a comparison to past high-growth peers suggests longer term potential is still undervalued.
"Twilio is a leading Communications Platform-as-a-Service (CPaaS) vendor. Our positive view is based on our belief that 1) enterprises are rapidly adopting A2P communication in modern and legacy applications; 2) A2P communication will increasingly be adopted via cloud-based platforms; 3) the CPaaS market is large and growing rapidly; and 4) Twilio can continue to leverage a successful developerfocused land-and-expand sales model, penetrate traditional enterprises, and expand outside of the US. Put together, we believe these will enable Twilio to drive strong growth for the foreseeable future. While shares appear expensive, a comparison to past high-growth peers suggests longer term potential is still undervalued," said Kidron.
Discussing valuation, the analyst said, "Our $50 PT is based on a 8.6x EV/sales (our 2018 estimate) and our belief that consensus expectations significantly underestimate Twilio's growth trajectory. While shares trades at 6.0x EV/sales our 2018 estimate vs. peers' average 5.2x, high-growth peers traded at an average multiple of 14.4x at a similar revenue level and stage of development."
Shares of Twilio closed at $35.42 yesterday.
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