Benzinga | May 27, 2021 04:58PM EDT

Why This Twilio Analyst Is Bullish

A Twilio, Inc (NYSE:TWLO) analyst is taking a bullish stance on the stock that's predicated on sustained, pandemic-driven demand trends for communications API platforms, long-term cloud solutions and first-mover advantages.

The Twilio Analyst: UBS analyst Taylor McGinnis initiated coverage of Twilio with a Buy rating and $385 price target.

The Twilio Takeaways: The pandemic accelerated demand for Twilio's high-revenu, low-margin messaging offerings and increased both adoption and awareness of its higher-margin cloud APIs and solutions such as Video, Flex and Segment, McGinnis said in a Wednesday initiation note.

Twilio will continue to ride the success of these products in the near-term while pursuing long-term solutions in growth areas such as customer data platforms and cloud communications as a service, both of which are in early stages across the industry, the analyst said.

Despite entrance in and greater focus on the space by larger companies such as Microsoft, Twilio has maintained its position as an industry leader in the market due to its first-mover advantages, she said.

While Twilio's current revenue drivers are not significantly differentiated from competitors, Twilio finds its competitive advantage with its pre-packaged solution APIs and the potential to convert current users of its purely communications platform as a service products to its longer-term, industry-specific solutions, McGinnis said.

As of now, Twilio is one of the hardest-hit mid-cap stocks following the February tech sell-off and now trades at a discount relative to peers with a similar growth profile, the analyst said.

UBS expects Twilio's revenue to grow 30%-plus over the next several years.

TWLO Price Action: Twilio shares gained 1.9% Thursday, closing at $338.69.