COVID-19 related demand surge accelerates Twilio (TWLO) stock to a new 52-week high

After reporting a stellar first quarter and a bullish outlook for Q2, cloud-based software solution provider Twilio (NASDAQ: TWLO) soared to a new high on Thursday and again surged today before reaching a 52-week high ($182.39) in the morning session. Earnings, on a non-GAAP basis, increased 20% and revenue jumped 57% during the first quarter of 2020. The diversification in the over 190,000 active customer base benefitted the company in a time when some customers saw declines, others saw growth. Across multiple industries, adapting to digital transformation projects happened sooner due to COVID-19.

COVID-19 update

Twilio’s customers in the hospitality and travel space exhibited unusual patterns during this pandemic period. Ridesharing saw a large decline while telemedicine and work-from-home contact centers saw a pickup of adoption during this time. Even though the company expects the back half of the year to remain uncertain, it expects the impacted industries to return to normalcy in the long-term and newer opportunities to continue to grow in importance.

Opportunities

With shelter-in-place and social distancing orders going into effect, demand for telehealth solutions soared. Protecting customers and employees from unnecessary in-person contact became a top priority for many businesses. As schools and colleges were closed online learning helped students to get engaged with their studies. These circumstances resulted in an unprecedented digital acceleration and created long-term opportunities for Twilio.

New deals

COVID-19 has drastically accelerated digital transformation projects across many industries. Prior to this outbreak, it was estimated that of the roughly 15 million contact center seats in the market, about 17% were in the cloud and now it is expected to be 50% by 2025. Twilio witnessed a 25% increase in average daily sign-ups from March 18 through April 30, compared to the first 11 weeks of the first quarter. The company signed many new deals in the quarter including companies like AB InBev and Standard Chartered Bank, while expanded its relationships with a Fortune 100 brick-and-mortar and online retail company and Latin America-based fintech company Nubank.

Outlook

in the three months ended March 31, 2020, Twilio experienced an increased usage of its platform in industries such as healthcare, education, entertainment and media as well as declines in usage from customers in the travel, hospitality and ridesharing industries. As it will be difficult to time the COVID-19 pandemic recovery, Twilio suspended its guidance for the full-year 2020. However, the company projected to non-GAAP loss to range between 8 cents and 11 cents for the second quarter, while revenue is eyed in the range of $365 million to $370 million. This revenue guidance is based on the headwinds from the more heavily impacted industries like travel, hospitality and ridesharing as well as the offsetting benefits from customers in education, healthcare retail and others.

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When answering on the longer term view, CEO Jeff Laswon said:

“The current pandemic environment, but also the long term five, 10 years from now, we see this essentially as to some point, entry point for many — even more long-term opportunities, both new kinds of customer relationships that we’re going to build, new markets that we may be able to participate in, but also new products and new needs of our customers that are going to emerge, and we are in a position to be able to invest. And that investment can be organic or could be inorganic, but we — with the balance sheet that we have, we see this as an opportunity to invest and to emerge from the COVID pandemic stronger.”

TWLO stock, which closed up 5.15% today and had a record single-day jump on Thursday, had almost doubled in the past one month.

Read the entire Twilio Q1 2020 earnings transcript here