12 Best Small Cap Tech Stocks to Buy

3. Twilio Inc. (NYSE:TWLO)

Market Capitalization as of September 11: $9.20 billion

Number of Hedge Fund Holders: 54

Twilio Inc. (NYSE:TWLO) is an American cloud communications company that provides programmable communication tools for making and receiving phone calls, sending and receiving text messages, and performing other audio/video communication functions using its web service APIs. It enables businesses to engage with their customers in a more personalized and effective way.

For the second quarter of 2024, the total revenues recorded by the company were $1.08 billion, up by 4% year-over-year. The earnings per share were $0.87. It reported more than 316,000 active customer accounts as of June 30, compared to over 304,000 active customer accounts at the same time last year.

There was an improvement in its customer spending, with its dollar-based net expansion rate coming at ~102% in Q2. This is due to the adoption of AI in the customer service space.  Moving forward, the company’s momentum is expected to be supported by strong partnerships with ISVs. It is also seeing increased demand for our international messaging services.

During Q2 2024, the count of hedge funds holding positions in Twilio Inc. (NYSE:TWLO) grew to 54 from 45 in the prior quarter. Now, the largest position is valued at $338,552,264 by Generation Investment Management.

A company report found that 84% of businesses think it provides good customer service, but only 54% of customers agree. This is because businesses need help understanding their customers’ data. By combining its communication tools, data, and AI, Twilio Inc. (NYSE:TWLO) can help businesses improve customer service.

Its stock has underperformed the market recently due to slower growth and weak customer spending, but new AI tools could help it improve customer service and grow its business. The overall revenue is expected to grow by nearly 20% over the next 5 years, paving the way for growth.

Aristotle Atlantic Focus Growth Strategy made the following comment about Twilio Inc. (NYSE:TWLO) in its Q4 2022 investor letter:

“We sold Twilio Inc. (NYSE:TWLO) and thereby reduced our subsector weight in software. The company reported a decent third quarter, but disappointed on fourth quarter 2022, full year 2023, and long-term guidance. The company is seeing macroeconomic headwinds and a slowdown spreading from technology, social media and cryptocurrency to retail and e-commerce. The other negative disclosure and a driver of this gross margin “miss” was that Twilio’s software sales are not accelerating at the rate that we expected. We are disappointed with this lower topline and low operating margin improvement guidance. The business transformation is taking longer than expected, and there is the heightened possibility that the new software growth could be stifled by more formidable competition as Twilio has made too many missteps.”