5 Best Growth Stocks To Buy For the Next 5 Years

4. Twilio Inc. (NYSE:TWLO)

Number of Hedge Fund Holders: 64 

Twilio Inc. (NYSE:TWLO) provides a cloud communications platform that enables developers to build, scale, and operate customer engagement within software applications in the United States and internationally. It is one of the top growth stocks to invest in. On August 23, Krisp, a global software company, revealed its partnership with Twilio which will allow Twilio Video customers to achieve high-quality audio when building video experiences through Twilio Video. Krisp will help Twilio Video customers to create an exceptional audio experience.

On October 19, Cowen analyst J. Derrick Wood maintained an Outperform rating on Twilio Inc. (NYSE:TWLO) stock and lowered the price target to $100 from $125, noting growing headwinds around marketing budgets which could impact portions of the portfolio of the firm. 

Among the hedge funds being tracked by Insider Monkey, St. Petersburg, Florida-based investment firm ARK Investment Management is a leading shareholder in Twilio Inc. (NYSE:TWLO) with 6.8 million shares worth more than $472 million. 

In its Q2 2022 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Twilio Inc. (NYSE:TWLO) was one of them. Here is what the fund said:

“Twilio Inc. (NYSE:TWLO) offers a full suite of cloud-based communications software, services and tools that allow companies in a wide range of businesses to build omnichannel communications capabilities (video, chat, voice, SMS, fax and email) directly into their customer-facing applications without needing to build backend infrastructure and interfaces. The company also provides software tools that allow its users to gather and categorize customer data (its Segments offering) and to create next-generation call centers (Flex) to utilize this data in customer interactions. Twilio is the leader in this fast-growing $80 billion Communications-Platform-as-a-Service (or CPaaS) market, having grown its customer base 5x in the past five years to 268,000 customers and a $3.5 billion run rate revenue for 1Q22. The company’s net revenue retention rate has exceeded 125% every year since its 2016 IPO and its customer churn remains less than 4% (for customers with > $30,000 revenue), evidence of the loyalty of Twilio’s customers to its platform (and a high switching cost) as well as the company’s increasing number of offerings. The company’s revenue is generated from both recurring revenues from subscription fees as well as volume-based charges for usage.

TWLO expects to maintain a +30% annual organic revenue growth rate through at least 2024, with long-term gross margin expansion from 56% to 60%-65%, and EBITDA margins approaching 35% as revenue scales. As of 1Q22, TWLO had $4.2 billion net cash and should turn FCF positive this year. Over the next several years, we expect the company to grow its excess cash significantly as the company operates an asset-light business model with low capital needs of just over 1% of current revenue (read more)