Stocks’ Details 

Twilio Inc.

TWLO Expands Partnership with Calabrio: Twilio Inc. (NYSE: TWLO) is a cloud communication platform service company that provides software to make and receive phone calls, send, and receive text messages and perform other communication functions using its web services APIs. Recently, Calabrio extended its strategic partnership with TWLO, making it easy to implement the leading workforce engagement management suite on Twilio Flex. 

TWLO Completes Buyout of Segment: In another update, TWLO had stated that it has completed its previously announced acquisition of Segment, the market-leading customer data platform. The deal was valued at ~$3.2 billion in Twilio Class A common stock, on a fully diluted and cash-free, debt-free basis. 

3QFY20 Key Highlights: During the quarter, the company reported non-GAAP earnings of 4 cents per share, up 33.3% year over year. Revenues for the quarter skyrocketed 52% on pcp and came in at $448 million, owing to higher clientele and the Sendgrid buyout. The increasing acceptance of Twilio Flex is also a tailwind. Non-GAAP operating income for the quarter stood at $7.3 million, up from operating loss of $3.6 million posted in the year-ago quarter.

3QFY20 Results (Source: Company Reports)

Outlook: For 4QFY20, the company expects non-GAAP loss per share to be in the range of 8 cents and 11 cents. Revenues for the December quarter is expected to be between $450 million and $455 million, whereas non-GAAP operating loss is predicted in the range of $10 million to $15 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company exited the quarter, with cash & cash equivalents and short-term marketable securities of $3.3 billion. The stock of TWLO is trading close to its 52-weeks’ high level of $374.49. The stock of TWLO gave a return of ~61% in the past six months and a return of ~277.5%% in the past nine months. On a technical front, the stock of TWLO has a support level of ~$322.2 and a resistance level of ~$375.8. We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a target price with a correction of low single-digit (in % terms). For the purpose, we have taken peers like - Cisco Systems Inc (NASDAQ: CSCO), Zoom Video Communications Inc (NASDAQ: ZM), and RingCentral Inc (NYSE: RNG), to name few. Considering the current trading levels, steep price movement in the past months and valuation, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $362.01, up by 0.48% on 11 January 2021.

Microchip Technology Inc.

Pricing of Senior Notes: Microchip Technology Inc. (NASDAQ: MCHP) is engaged in manufacturing microcontroller, mixed-signal, analog and Flash-IP integrated circuits. In a recent update, the company stated the pricing of $1.4 billion worth senior secured notes scheduled to mature on February 15, 2024. The notes carry an interest of 0.972% on an annual basis.

Quarterly Highlights (For the Quarter ended 30 September 2020): During the three months ended 30 September 2020, net sales of the company went down by 2.1% to $1.31 billion. In the same time span, non-GAAP earnings stood at $1.56 per share, up ~9.1% year over year. Non-GAAP gross margin remained stood at 62.2%, flat on a year-over-year basis. During the quarter, the company has also strengthened its balance sheet and paid down $331.1 million of debt. The Board declared a record quarterly dividend of 36.85 cents per share, up from 36.8 cents per share from the previous quarter dividend.

Quarterly Financial Highlights (Source: Company Reports)

Outlook: For 3QFY21, the company expects net sales to be in the range of $1.310-$1.375 billion, and non-GAAP earnings to be in the ambit of $1.51-$1.63 per share. For 3QFY21, the company expects non-GAAP gross margin to be 62.4-62.8%, while non-GAAP operating margin is expected to be between 38.7% to 39.7%.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per NASDAQ, the stock of MCHP is inclined towards its 52-weeks’ high level of $148.48. The stock of MCHP gave a positive return of 29.5% in the past three months and a return of 85.8% in the past nine months. On a technical front, the stock of MCHP has a support level of ~$122.4 and a resistance level of ~$148.2. We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a target price with a correction of lower double-digit (in % terms). Considering the current trading levels, high returns in the past months, and volatile environment, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $147.81, up by 0.28% on 11 January 2021. 

Skyworks Solutions Inc

Quarterly Highlights (For the Period ending 2 October 2020): Skyworks Solutions Inc (NASDAQ: SWKS) is an American semiconductor company, which manufactures semiconductors for use in radio frequency and mobile communications systems. During the fourth quarter ended 2 October 2020, the company delivered decent results and reported a revenue of $956.8 million, up ~16% year over year. In the same time span, operating income was $267.6 million and diluted earnings per share stood at $1.48. The Board declared a dividend of $0.50 per share, which was paid on December 10, 2020.

Results Highlight (Source: Company Reports)

Outlook: The company is capitalizing on market momentum and accelerating widespread adoption of 5G. The company has provided guidance for the first quarter of FY21 and expects revenue to be between $1.04-$1.07 billion, with a non-GAAP diluted earnings per share to be $2.06 per share. Gross margin is expected to be in the range of 50.25%-50.75% and operating expenses of ~$148 million in 1QFY21.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company exited the quarter, with cash & cash equivalents and marketable securities of $980 million. As per NASDAQ, the stock of SWKS is trading close to its 52-weeks’ high level of $163.35. The stock of SWKS gave a return of ~25.2% in the past three months and a return of 79.1%% in the past nine months. On a technical front, the stock of SWKS has a support level of ~$152.2 and a resistance level of ~$165.4. We have valued the stock using the P/E multiple based illustrative relative valuation and have arrived at a target price with a correction of low single-digit (in % terms). Considering the current trading levels, steep price movement in the past few months, key investment risks and valuation, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $162.05, down by 0.87% on 11 January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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