Two Insiders Go Big And Bold

Image by Bethany Drouin from Pixabay

In most things, having two is better than one. For this week’s highlighted insider buy has two executives investing in stock after a history of predominantly selling. Normally, more is better too. The more money an insider spends the better in our opinion. Both of this week’s insiders made their largest buys, sort of.

Twilio Inc. (TWLO) Director Donna Dubinsky bought 3,995 shares at $62.72 for a total of $250,558. It is the most the director invested in TWLO as it is her first purchase. Beforehand, she was a three-time seller, unloading stock at $265.80, $400.18, and $323.52 per share, collecting a total of $482,090.  (1)

Chief Executive Officer (CEO) Jeff Lawson’s recent buy is a doozy. The CEO acquired 158,081 shares at $63.26 for a touch more than $10 million. Lawson only has one other purchase, 100,000 shares at $23.43 for $2,343,180. (2) In between the pair of buys, the CEO sold, sold and sold, pocketing more than $355 million, usually at more than $100 per share.

Twilio provides software and communications solutions in the United States and internationally. The company operates cloud communications platform that enables developers to build, scale, and operate customer engagement within software applications. Its customer engagement platform provides a set of application programming interfaces that enable developers to embed voice, messaging, and email interactions into their customer-facing applications. In other words, a form of client relationship management (CRM).

The CRM market has grown significantly in recent years, driven by several factors:

  1. Digital Transformation: The rise of digital channels and technologies has made it easier for businesses to interact with customers and for customers to interact with businesses. This has led to an increase in the volume and complexity of customer data, which has made CRM solutions increasingly necessary.
  2. Customer-Centricity: Businesses have realized the importance of putting the customer at the center of their operations. This has led to a growing demand for tools that can help businesses understand and respond to customer needs and preferences.
  3. Cloud Computing: The availability of cloud-based CRM solutions has made it easier and more cost-effective for businesses to implement CRM strategies. Cloud-based solutions offer several benefits, including scalability, flexibility, and accessibility from anywhere with an internet connection.
  4. AI-Powered Solutions: The emergence of artificial intelligence (AI) and machine learning (ML) has enabled the development of more advanced CRM solutions. AI-powered solutions can help businesses automate routine tasks, analyze customer data, and provide personalized recommendations and insights.

According to Fortune Business Insights, the global CRM Market size is projected to reach USD 145.79 billion in 2029, at CAGR of 12.5% during forecast period [2022 – 2029]; Driving Market Growth through Rapid Digital Transformation. (3)

Analysts expect TWLO to find profitability this year. The communications company’s losses were $0.15 in 2022 and are forecasted to hit $1.25 in 2023 and up to $1.88 next year. (4) Sales are slated to rise more than 12 percent this year to $4.3 billion from $3.83 billion. The topline is expected to keep on climbing in 2024 to and even $5 billion.

The typical company in Twilio’s industry trades at 30.2 times earnings (P/E) and at 3.7 times sales (P/S). Let’s apply the industry average valuations to Wall Street’s 2024 outlook for TWLO to generate potential price targets.

P/E: $56.78

P/S: $104.13

Meanwhile, Wall Street has a one-year price target of $83.92. (5)

OVERALL: It’s been our experience that the period when companies go from a loss to a profit is usually a good time to invest. Maybe that’s why CEO Lawson and Director Dubinsky went bold with their buys. Twilio Inc. (TWLO) appears to have attractive upside, but it comes with downside risk according to average industry valuation metrics. As a result, the tech company is only for investors with well above average risk tolerance and a time horizon of at least 24 months.


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