As the new year has started, many analysts are publishing their “Top Pick” lists for 2020. This has favored well for several software stack companies so far this month, following the sell-off in many high growth cloud/software names we experienced in 2H2019. Coming out of this, on Jan 7th, two analysts named Twilio to their Top Pick lists for 2020. I have been long in Twilio and was happy to see this affirmation to start the year.

These were the price targets set, along with the announcement of inclusion in the Top Pick category.

  • Northland Securities – Outperform, $130 target
  • Oppenheimer – Outperform, $145 target

Twlio shares closed 2019 at $98.28 and are now at about $112 (Jan 9th), representing growth of 13.4% so far in 2020.

The Oppenheimer analyst, Ittai Kidron, provided some commentary. He stated that Twilio “seems likely to experience strong growth for the foreseeable future.” He elaborated on several growth drivers for 2020:

  • Cross-sell opportunities resulting from the SendGrid acquisition. The majority of sales since the acquisition closed have represented selling SendGrid email services to existing Twilio voice/text customers. The opportunity for 2020 represents the reverse.
  • New verticals kicking in revenue, including Flex, Marketing and Conversations.
  • Continued adoption of the core application-to-person (A2P) services in new software offerings by mainstream enterprises. As part of digital transformation initiatives, companies are building custom apps to extend services directly to customer devices. These include communication prompts through text/voice.
  • Leveraging further growth in existing customer relationships through Twilio’s developer-centric model and land-and-expand sales motion.

The cross-sell opportunity should be significant. As of Dec 31, 2018, Twilio reported having 64,286 customers (did not include SendGrid). In Mar 31, 2019, Twilio reported 154,797 customers, which did include SendGrid. So, we can assume that SendGrid had about 80,000 customers on its own. Granted, there is likely a fair amount of overlap between the two. I know that at my previous company, we used both SendGrid and Twilio separately before the merger. But, we still can expect some boost from selling the larger set of voice/text/video/auth solutions to SendGrid customers in a bundled fashion.

Flex has taken some time to build traction, which the leadership team has acknowledged on recent conference calls. However, the CFO mentioned at an analyst meeting that their general expectation is that Flex will grow to several hundred million dollars a year in revenue in the next several years. The Marketing offering is a natural extension to the SendGrid email solution. Conversations, launched in Q3 2019, is a particularly powerful capability, which fits nicely into customer care solutions. CIOs have identified customer service through omni-channel communications as a priority for 2020. Providing the ability to maintain a single communication thread across voice, text, WhatsApp and other channels, Conversations will meet this CIO focus neatly.