Technology companies continuously evolve and upgrade in response to changing IT needs, which of late have centered around cloud computing, artificial intelligence, machine learning, automation, virtual and augmented reality, internet of things (IoT), 5G, and more. As such, the adverse impact of impending interest rate hikes is expected to be mitigated by robust demand for state-of-the-art technological advancements.
The U.S. tech market is the largest globally, representing 33% (approximately $1.8 trillion) of the global market. IDC has forecasted that the technology industry is expected to exceed $5.3 trillion in 2022.
Given this backdrop, Wall Street analysts expect the current tech stock rout to be the perfect entry point into fundamentally sound large-cap tech stocks Twilio Inc. (TWLO), DocuSign, Inc. (DOCU), and RingCentral, inc. (RNG). The Street expects these stocks to rally more than 65% in price in the near term.
Twilio Inc. (TWLO)
San Francisco-based TWLO offers a cloud communications platform in the U.S. and internationally. Its platform provides a set of software applications and programming interfaces that handle higher-level communication logic needed for customer engagement and enable developers to build, develop and scale with these applications. TWLO has a market capitalization of $30.18 billion.
Last December, TWLO launched Twilio Ventures, a $50 million fund designed to champion the next generation of developer-centric software companies. “Twilio Ventures will accelerate our ability to empower builders and the start-up community building the future of customer engagement by investing directly in their growth and success," said Bryan Vanisan, senior vice president of corporate development.
In the fiscal fourth quarter, ended Dec. 31, 2021, TWLO’s revenue increased 53.8% year-over-year to $842.74 million. Its gross profit grew 40.9% year-over-year to $421.95 million. And the company’s cash and cash equivalents increased 58.4% over the year ended Dec 31, 2021, to come in at $1.48 billion. TWLO’s total assets grew 37% year-over-year to $12.99 billion.
A $861.54 million consensus revenue estimate for its fiscal first quarter, ending March 2021, represents 46% year-over-year growth from the same period in 2021.
TWLO’s stock has slumped 35.4% in price year-to-date. However, the 12-month median price target of $333.75 indicates a 96.2% potential upside from yesterday’s closing price of $170.13. The price targets range from a low of $240.00 to a high of $510.00. Of the 26 Wall Street analysts that rated TWLO, 25 rated it Buy, while one rated it Hold.
DocuSign, Inc. (DOCU)
San Francisco, Calif.-based DOCU is a provider of cloud-based software in the U.S. and internationally. The company offers e-signature solutions, CLM, Gen for Salesforce, Negotiate for Salesforce, analyzer, CLM+, and guided forums for various consumer applications. It serves enterprise, commercial and small businesses and sells its products through direct, partner-assisted, and web-based sales. It has a market capitalization of $22.38 billion.
On Oct. 27, 2021, DOCU teamed up with Salesforce.com, Inc (CRM) to automate the contract process with AI-based smart solutions and accelerate collaboration with Slack functionality. This should help drive customer revenue and create enhanced digital customer experiences. With this global strategic partnership, DOCU is expected to access new markets and a new customer base. The company might access new growth prospects and boost its revenue streams.
On Oct. 14, 2021, DOCU introduced DocuSign Ventures to co-invest and partner with companies that are raising early-stage funding and innovating the agreement process. DOCU’s recent investments include The LegalTech Fund, Seal Software, and Clause. DOCU’s total revenue increased 42.4% year-over-year to $545.46 million in its fiscal third quarter, ended Oct. 31, 2021. In its third fiscal quarter, DOCU’s gross profit increased 48.9% year-over-year to $449.42 million. The company’s income from operations grew 148.8% year-over-year to $122.16 million. Its net income rose 162.5% year-over-year to $121.09 million, and its net income per share increased 163.6% year-over-year to $0.58.
Analysts expect DOCU’s revenue for its fiscal fourth quarter, ended Jan. 31, 2022, to come in at $561.62 million, representing a 30.3% rise year-over-year. The Street expects DOCU’s EPS to improve 29.4% year-over-year in the about-to-be-reported quarter to come in at $0.48. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 24.5% in price year-to-date. However, the 12-month median price target of $203.69 indicates a 77.1% potential upside from yesterday’s closing price of $115.00. The price targets range from a low of $165.00 to a high of $307.00. Of the 16 Wall Street analysts that rated DOCU, eight rated it Buy, seven rated it Hold, while one rated it Sell.
RingCentral, Inc. (RNG)
RNG offers software-as-a-service solutions and serves businesses in North America. The San Mateo, Calif.-based company’s products include RingCentral Office, RingCentral Contact Center, RingCentral Engage Digital, RingCentral Engage Voice, and RingCentral Live Reports. The company sells its products through a network of direct sales representatives, sales agents, resellers, and channel partners. RNG has a market capitalization of $14.21 billion.
Yesterday, RNG expanded its partnership with Deutsche Telekom to offer its customers RingCentral X powered by Telekom, an end-to-end cloud-based communications and collaboration solution. This partnership might increase RNG’s customer reach and boost its revenues.
On Feb. 3, 2022, RNG partnered with Vodafone Business and unveiled ‘Vodafone Business UC with RingCentral,’ a powerful cloud communication platform to provide customers with more choice and flexibility in terms of workforce collaboration and remote working. This open platform might pave new paths to consumer engagement and increase the company’s profit margins.
In the fiscal third quarter, ended Sept. 30, 2021, RNG's total revenues increased 36.6% year-over-year to $414.63 million. RNG's gross profit rose 37.4% from the prior-year quarter to $304.18 million. The company's income from operations increased 41.1% year-over-year to $43.55 million. Its net income grew 37.3% year-over-year to $33.14 million, and its net income per share rose 38.5% year-over-year to $0.36.
The $434.83 million consensus revenue estimate for its fiscal fourth quarter, ended Dec. 31, 2021, represents 30% year-over-year growth. And the $0.37 consensus EPS estimate for its fiscal fourth quarter indicates 27.4% year-over-year growth. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
Over the past year, RNG shares have slumped 62.8% in price. However, the 12-month median price target of $261.67 indicates a 67.4% potential upside from yesterday’s closing price of $156.31. The price targets range from a low of $220.00 to a high of $300.00. Of the 13 Wall Street analysts that rated RNG, 12 rated it Buy while one rated it Hold.
TWLO shares were trading at $162.98 per share on Friday morning, down $7.15 (-4.20%). Year-to-date, TWLO has declined -38.11%, versus a -8.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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