Twilio Valuation in Year 2027. Looks incredibly cheap today
Based on 2022 Investor Day Presentation
Twilio held their 2022 Investor Day on November 3rd 2022. They laid out a broad strategy to develop into a Customer Engagement Platform. I understand the vision and the increasing SaaS-type gross margins that come with that as they move away from a consumption-driven pricing model.
You may read the presentation here : https://s21.q4cdn.com/963721274/files/doc_presentations/2022/2022-Investor-Day-Deck-FINAL-(Nov-3).pdf
I will focus this article on the valuation of Twilio in year 2027 based on growth numbers given in that presentation.
Growth Numbers (Expected)
For simplicity, we shall ignore the growth in revenue from acquisitions and simply assume the whole revenue numbers are Organic.
Organic Revenue growth annually : 15-25%.
Revenue today : $3.3b (expected FY is $3.8b, but let’s sandbag it)
Enterprise Value : $5.04b
EV / Revenue today : 1.527x
Revenue in 2027 (15% CAGR) : $6.6b
Long Term EV / Rev multiple for SaaS : 5x
Expected Market Cap (15% CAGR) in 2027 : $33b
Expected Market Cap (20% CAGR) in 2027 : $41b
Expected Market Cap (25% CAGR) in 2027 : $50.3b
Twilio Looks Really Cheap Today
Assuming Twilio trades at a more traditional 10 year EV / Revenue multiple of 5x, it looks incredibly cheap today.
The base case of 15% growth gives us a 6.5x return in 5 years with a 10x upside potential. At the base case, that’s a 5 year annualised return of 45%.
The company isn’t profitable and growth has decelerated. However, if the given numbers are to be believed and Twilio makes north of $6.5b in 2027, it isn’t a stretch to imagine a wonderful return north of 20% on a multiple contraction to a mere 3x.
Heck, even if Twilio trades at 1.5x, that’s still a 15% CAGR return. Definitely not shabby.
Note : I am not a financial advisor and this is my personal portfolio. Do not blindly follow and do your due diligence. You can lose money by investing in the stock market. All my writing is opinion and NOT advice.
I have been wrong on some firms. Peloton for example didn’t grow as intended and management tore through the balance sheet with little discipline. This is par for the course in investing. You win some, you lose some. Had you blindly followed my work on Peloton, you’d have lost over 80% of your capital. Proceed with caution.