This is something of a catch up post.
On October 5 I added Twilio (TWLO) to my Jubak Picks and Volatility portfolios. I announced that buy in a post on October 2 and then again in my Special Report: “Your Investing Guide for the Next 6 Dangerous Stock Market Months” I noted it as  buy. But somehow I never quite posted it to those two portfolios. Something I’m fixing today.
In my Special Report I included Twilio among a group of stocks that I’d like to own during the potentially sluggish days of October and into November. These stocks had enough current momentum to climb even on days when the market did nothing. (You can find the other names in my Special Report.) In Twilio’s case that’s because it seems the perfect stock for a coronavirus economy. Twilio makes  cloud-based software that allows customers’ software developers to add voice communications like phone calls, text messaging via SMS, video, and a wide variety of other types of communications into their software applications. When software developers need the apps that they’ve written to communicate with an end user, they use Twilio’s platform. You’ve used Twilio if you’ve called Lyft or Uber from inside the company’s app, if you’ve used two-factor authentication (again from inside an app), or made dinner reservations through Open Table’s app. In other words Twilio makes a platform that seems remarkably attuned to a time when we’re all working from wherever and want to talk to or order from all those distributed somebodies using whatever device or form of access we want.
Twilio climbed climbed 13% on October 2 after analysts raised price-target after Thursday’s investors day event. (For example Morgan Stanley raised its price target for Twilio to $270 from $240. I would note the stock closed at $290 on October 2.) At the session, Twilio said that it expects sales growth of better than 30% a year in each of the next four years. Wall Street had been looking for 25% growth in 2021 and 23% growth in 2022.
With its close at $290.36 on October 2, Twilio had recovered all the ground it lost in August and September after the company reported quarterly financials that showed a drop in revenue growth. From a high of $286.33 on August 3, the shares fell to a low of $221.87.
But Twilio wasn’t done and isn’t done. The stock has continued to move up on news that it will acquire Segment, a fast growing data platform company that does the same thing for how a company stores its data as Twilio does for a company’s communications. Companies often store their customer data across different software services and computing platforms.  Segment pulls all of that customer data onto a unified cloud-based software as a service platform. In the fragmented customer data platform market, Segment was the top player with a 9% share last year. The deal expands Twilio’s addressable market and adds more revenue growth speed to its already fast growth. Segment grew revenue by 88% in 2019; Twilio’s revenue grew by 75% that year. Twilio is much bigger–as measured by revenue–than Segment with $1.13 billion in revenue in 2019 to $180 million for Segment.
This deal follow a recent pattern at Twilio of extending its reach beyond its core communication programming interfaces to become something like a diversified cloud platform provider. Twilio has acquired SMS provider BeepSend and email service provider SendGrid–and now Segment–to become a competitor in a bigger aggregate market. (That expansion will speed up the day that puts Twilio into competition with MessageBird, Next, Bandwidth, Salesforce, and Microsoft.)
Right now, though, the market has cheered this acquisition with the stock climbing another 2.47% today.
I’ve owned Twilio in my Volatility Portfolio off and on and off and on again over the last year. Unfortunately, the switch was on off for this recovery.
On October 5 I added Twilio back to my Volatility Portfolio and my Jubak Picks Portfolio as well.. I think the momentum from the increase in projected revenue growth, the company’s positioning as a stock that will benefit from the trend toward virtual offices and working at home, and the expanded addressable market that comes with the Segment acquisition make it one of a handful of technology stocks that I’d like to own even as (and because of) the slowdown in the coronavirus recovery. And yes, I do know that the shares are selling at a premium of 68% according to Morningstar.)
On October 2 I set a target price of $340 a share in my Jubak Picks Portfolio. The stock has already climbed to $337.88 as of October 13. So I’m setting a new target price of $390 in that portfolio.
Full disclosure: I own shares of Twilio in my personal portfolio. I have no intention of selling those shares at this time and will give readers a three-day’s advance heads up when if I do decide to sell.
