By Jon Swartz
Jeff Lawson has been through an economic calamity before.
But with the added onus of a global health crisis, Twilio Inc.’s /zigman2/quotes/205796518/composite TWLO +6.54% chief executive was bracing for the great unknown.
All indications are he and the company he co-founded in 2008 are passing with flying colors.
“The world has been permanently impacted by COVID,” Lawson, who started his company in the teeth of the Great Recession, told MarketWatch in a phone interview late Friday. “It has fundamentally changed telemedicine, education, remote work.”
Twilio’s technology platform lets businesses send text messages, deliver emails and make video calls -- in other words, tools that are essential for stay-at-home workers. It has become an essential service among essential workers.
On Wednesday, the cloud-communications software company reported a 57% spike in fiscal first-quarter revenue that sent its stock soaring 32% in extended trading. Twilio shares have more than doubled the past five weeks to a record-closing $186.61 on Monday, while the broader S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.49% has advanced 19% in the same period.
Wall Street is betting big on Twilio. Of the 26 brokerages covering the stock, 19 have a “buy” or higher rating and the rest are “hold.”
Reflecting the bullish demeanor, at least eight brokerages raised their price targets on the stock. Mizuho led the pack, raising its target to $180 from $125. “Twilio stands to be a significant beneficiary of COVID-19 in the short term, boosting usage volumes dramatically,” Mizuho analysts wrote in a note. “Longer term we expect the company to sustain robust growth.”
“Everyone had a digital-transformation plan, but it literally just happened overnight,” Lawson said. “The impact of this pandemic accelerated or forced those plans in 2020.”
The San Francisco-based company is one of several tech firms specializing in digital-collaborative tools, online-content delivery, emergency response, and educational materials that have experienced surges in sales the past few months. Facebook Inc. /zigman2/quotes/205064656/composite FB +3.50% , Dropbox Inc. /zigman2/quotes/205896836/composite DBX +3.85% , Chegg Inc. /zigman2/quotes/205655041/composite CHGG +1.68% , and Fastly Inc. /zigman2/quotes/212251938/composite FSLY +6.55% have also seen steep gains.
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Most people familiar with Twilio think of it as the company that powers hospitality and transportation companies like Lyft Inc. /zigman2/quotes/208999293/composite LYFT +7.89% , Uber Technologies Inc. /zigman2/quotes/211348248/composite UBER +6.61% , and Airbnb. And, addressing those high-profile customers, Twilio acknowledged demand in the quarter dwindled from that trio.
The shortfall, however, was offset by increased use of its cloud-based services by call centers, education companies, health care and food delivery firms, the company said. Indeed, Twilio had more than 190,000 active customer accounts as of March 31, up 23% from a year earlier. Among the new accounts: Anheuser-Busch InBev S.A. /zigman2/quotes/209225053/composite BUD +0.93% , the city of Pittsburgh, and Shopify Inc. /zigman2/quotes/209033712/composite SHOP +3.55% .
Wednesday’s results highlight Twilio’s increasingly more diverse business. Travel and hospitality, for instance, are less than 10% of its business. The other 90% are industries such as health care, government, and nonprofits that have been pivotal in creating apps during the COVID-19-era.
Though circumstances were vastly different in 2008, when Twilio was founded during another major economic downturn, there is a connective tissue between then and now. “In the early days, we talked to customers and developers about what they want,” said Lawson, who initially funded Twilio with $30,000 from his parents and the parents of two other founders. As of early Monday, Twilio’s market value is $25.2 billion.
“If you follow the customers, the right things will happen,” Lawson said. “In any economic climate, focus on your customers. And we offer three things everyone needs now: digital engagement, software flexibility, and cloud scale. This is what the business world needs.”