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Over the past two months, various analysts have explained to us why Twilio (TWLO) is a sale, and more recently, it has been described as a blatant bubble. This is not surprising, as almost all of the most powerful growth stocks attract many bearish analysts who believe that P / E ratios matter in these names. More bearish analysts end up piling up after seeing an arithmetic-scale chart that looks like a rocket taking off, but this type of analysis only represents music to my ears as a "sounding board". shareholder. When a growth stock experiences accelerated growth, an exceptional price action and that the majority of people find it too expensive, it will probably become more expensive. Not to mention names, we are all aware that perma bears have pampered Amazon (AMZN) and Netflix (NFLX) for years because they were too much up. Twilio may be a significant amount, but for my strategies, it's never a hit against a stock. I want the stocks I own to be strong, which tells me that they are in high demand. Although I do not buy Twilio at these prices, I hold firmly to my position. As Livermore said so well "It was never my thought that brought me much, it was always my meeting".
Twilio currently holds two very incredible honors, and both make it a title that should be held tight. For starters, it is in the top 1% of the strongest shares of the market. Second, there are growth indicators that even other growing companies would salivate. When one is lucky enough to come across one of these types of companies and own them, selling at 10-20 points is rarely the right choice. There are rare occasions when one should be a pig on the market, and I think Twilio is one of them. Analysts may think that the P / E ratio of over 1000 is too high, but funds holding stocks wait 12 to 18 months, not six months later. Yahoo has traded more than 1,000 times its earnings early in its massive advance in the 1990s, as has AOL, and high-growth companies rarely have reasonable P / E ratios. From my experience, I have never found that P / E ratios have any value. Attempting to value an action whose growth accelerates so quickly that even most analysts can not model it is futile. You can not successfully model the 1% that does not fit most models; they are out of the mold of what is normal.
Before discussing the fundamental data and growth indicators of Twilio, the leader in cloud communications, it is worth presenting some perspective diagrams from a technical point of view. I'm concerned that bearish analysts who suggest the title went too far too fast are busy looking at the daily charts, which are short-term, as opposed to long-term charts that more accurately indicate the potential of a title. If you look at the Twilio chart below, at $ 125.00, you will find that it is a very nice race and that it seems prolonged. However, if we zoom out on a quarterly chart, there is good reason to believe that this decision may only be in the first few rounds of the day.
(Source: TC2000.com)
As can be seen in the quarterly chart below, Twilio has detached from a massive base of IPOs and market correction in the fourth quarter allowed the title to test again his base before resuming his lead. This quarterly chart below does not indicate an overbought stock but a stock that has shown extraordinary follow up after a consolidation of more than 2 years.
(Source: TC2000.com)
The big basics at the beginning of the growth phase of a company often occur in the 3rd or 4th round of the stock advance, that is why daily charts can be very misleading to judge whether or not an action is overbought. Below is an overview of Chipotle Mexican Grill (CMG) almost 10 years ago, which broke during a multi-year period in the five years following its IPO. .
(Source: TC2000.com)
As we can see in the Chipotle chart below, the stock has risen 190% over the next 18 months after it was taken out of the base and has finally gained 300%, from $ 155.00 to over 700 , 00 USD. This does not mean that Twilio must follow the same game book; it is simply a matter of providing the context with the fact that daily charts are not the right way to evaluate overbought signals. Inexperienced investors will use these short-term charts and these fanciful fundamental models to try to predict stock highs, but that just leaves them a bunch of dated articles as a 2012 article calling Amazon the next Netscape. The price action is the final arbiter, and with so many actions having low fundamentals lying around on the market, I see no reason to try to call a summit. 1% of the strongest shares like Twilio.
(Source: TC2000.com)
Now let's take a look at the benefits and sales and see what sets Twilio apart from its competitors. From annual earnings per share [EPS] Below, we can see that the company has finally switched to profitability over the course of FY-2018 and is expected to record year-on-year EPS growth of 170% for FY-2020, according to analyst estimates. According to analysts' estimates, of the database I monitor, fewer than 45 companies with a market capitalization greater than $ 500 million meet these criteria. If we take into account revenue growth of 50% over the last two quarters, we are now only 10 out of 8,000 companies, or about 0.001% of companies. This is significant and shows how rare this type of revenue and sales growth is.
(Source: YCharts.com, Author's Table)
I've built a table showing Twilio's annual EPS below and, as we can see, there's a strong upward trend that should accelerate in 2020 Although bearish analysts on the stock can examine the trees that are estimates for the 2019 fiscal year, which are much less important than we are already in 2019, 2020 is the forest and what the funds are positioning for. It should be noted that I have found in the past that these analyst estimates were rather conservative for high-growth companies such as Twilio.
(Source: YCharts.com, Author's Table)
Turning now to revenue growth, it is also an area in which Twilio really stands out from his peers. As we can see from the chart below that I've established, the company was growing its sales turnover by about 40% in 2017 and has seen an acceleration going up to At 68% and 77% over the last two quarters. This type of revenue growth is not something you see every day, or even every year, and there are currently only a few companies with this type of growth. To scrap such an enterprise for high P / E and liquidate a position is rarely a wise long-term strategy.
(Source: YCharts.com, Author's Table)
To give a little more context to the previous example with a clear leader in its sector, the Chipotle Mexican Grill and its historical background, we can take a look at the earlier models of the Chipotle Mexican Grill from the period that I've built below.
(Source: YCharts.com, Author's Table)
(Source: YCharts.com, Author's Table)
The important quarterly technical breakthrough for Chipotle Mexican Grill was produced in late 2010 and we can see that earnings growth has remained robust for the company. Profits are expected to increase 25% or more per year for the next two years (2011, 2012), and these are incredible numbers for a chain of restaurants. It should also be noted that revenue growth was also strong at the time, with revenue growth of 16% in the first quarter of 2010 and 20% in the second quarter of 2010.
As I said earlier in the article, these comparisons that I make should not suggest that the same thing must happen with Twilio and that the title must advance an additional 250%. I'm just presenting the previous model of a big winner in the market and the way Twilio presents a similar technical scheme to that of Chipotle towards 2011 and an even more powerful growth of revenues and sales.
Given that Twilio is one of the top 0.1% companies on the US market in terms of estimates of future earnings and earnings growth, I see no reason to easily relinquish the title if owns it. It's not every day that we as investors are lucky enough to find ourselves in an action like this with a decent profit cushion, and when the hike is potentially huge with a disadvantage of equilibrium (no risk ), I will gladly use a wide stop to try to play for that up.
(Source: TC2000.com)
Looking at a more recent technical chart of the stock above, we can see that the market correction for the Q4-2018 has barely budged the stock. The stock has largely outperformed the market over the past year, is in a strong uptrend and is struggling to sneeze with a 25% decline in Nasdaq (QQQ) and continues to reach new heights. For this reason, I'm sticking to my position on Twilio, bought in January at nearly $ 100.00 the action. I'm using a little more than the breakeven on my position. In the worst case, I will win a small win and, in the best case, I can continue driving this winner to even higher heights.
(Source: Pinterest, photo of the author)
I believe that bearish analysts miss the mark on Twilio by focusing on short-term charts, harming the future growth of the company, which takes into account the market, and underestimating the strength of this company. When a market corrects as was the case in the fourth quarter of 2018 and one stock is holding on the side, this suggests a huge demand, with very large funds having a large stock offering. I stay long Twilio starting at $ 100.00 per share and I will remain optimistic as long as the $ 100.00 level is maintained. Although I do not buy more stocks at these levels because I do not have the ideal technical setup to do it, I think stocks are stable at current levels.
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Disclosure: I am / we are long TWLO. I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I do not have any business relationship with a company whose actions are mentioned in this article.
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