16 Most Undervalued Tech Stocks To Buy Now

7. Twilio Inc. (NYSE:TWLO)

Short % of Shares Outstanding: 1.36%

Number of Hedge Fund Holders: 54

Forward Price to Earnings Ratio as of August 28: 18.30

Twilio Inc. (NYSE:TWLO) is a cloud communication specialist that allows companies to improve their customer communications through its customer engagement platform (CEP). The company allows its customers to reach their audience through voice, text, emails, and other mediums.

Investors had forgotten about the stock due to its weak performance previously, however, thanks to its AI integration the company delivered cheerful results during its second quarter of 2024. Twilio Inc. (NYSE:TWLO) reported revenue growth of 4% year-over-year to $1.08 billion and organic growth of 7%. The company exceeded its original guidance range of $1.05 billion to $1.06 billion.

While revenue growth is impressive, what’s more notable are the factors that led to this growth. The company was able to improve its active customer base from 304,000 customers a year ago to 316,000 customers during Q2 2024. Moreover, Twilio Inc. (NYSE:TWLO) also witnessed improvement in customer spending as its dollar-based net expansion was 102% during the last quarter.

For context, dollar-based net expansion means that the company was able to generate more income from its existing customer base. This improvement was mainly due to its adoption of AI in its customer service space, which is expected to keep the growth needle moving in the long run.

TWLO is also trading at a 25% discount to its sector and its earnings are expected to grow by 38.40% during the year to reach $3.39. Thus, making it an undervalued tech stock to buy now.

54 hedge funds held the stock in Q2 2024, with stakes totaling $1.95 billion. Generation Investment Management is the top share holder of the company with a position worth $338.55 million.

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.”