A stock is rarely a clear gift. However, there are plenty of opportunities right now that have the potential to be a long-term economic entry point. With reasonable risks, this is a good opportunity for your own wealth accumulation.
On the US platform Seeking Alpha, a writer has now explained that twilio (WKN: A2ALP4) is a giveaway on current valuation indices and for long-term prospects. Why, why, why? Let’s take a closer look at that now.
Twilio Stock: A gift…?!
The Twilio action has an extremely attractive starting position for said author. He already mentioned at the beginning that he was an undisputed leader in a fast growing market with fantastic growth rates and exciting forecasts. Even if it were a pandemic play, the market is far from exhausted. In case the name means nothing to you: Twilio is formally a company that operates communication software as a service and, among other things, provides valuable tools to application developers.
Later in the text: Action is a gift because the prospects are just as bright. With an operating margin of 54.8%, there is already the possibility of a profitable base. For investors with a long-term perspective, there is the potential to generate revenue of up to US$14.25 billion by 2027 with only 30% annual sales growth. The total market could reach $47 billion at that point, possibly underscoring Twilio’s conservative growth forecast.
With net income growing 20%, net income could be $2.85 billion in 2027. This is another reason why the stock is already a gift to the author today. At a market cap of $24.05 billion, the price-to-sales multiple would be less than 2, and the price-to-earnings multiple would be just 8.4 at that point. With the author’s price at a higher dilution, which could suggest a price-earnings ratio of 30 by then. Management finances its growth through acquisitions in part by diluting the shareholder base.
Despite this, the author expects Twilio to return to the $400 per share mark. Or an average return of 20% per year. That’s a gift you rarely get from such quality growing stock.
Twilio is certainly an exciting action. A gift? That is a very subjective view. Anyone who has participated in the sale from 351 euros to 120 euros should hardly see it like this. But precisely because of this current valuation situation, the opportunity may stand out again.
At least Twilio deserves a closer look from investors who want to focus on clear growth, an interesting business model with quality, and a given growth market. Above all, profitable growth can bring an appreciation here.
The article “This Stock Is Now a Gift!” first appeared in The Motley Fool Germany.
Vincent owns shares of Twilio. The Motley Fool owns Twilio stock and recommends it.
Motley Fool Germany 2022