On Thursday, Wolfe Research's analysts demonstrated confidence in Twilio Inc. (NYSE:TWLO), raising the price target on the company's shares to $155 from $140, while maintaining an Outperform rating.
Currently trading at $112.36, Twilio has garnered significant analyst attention, with InvestingPro data showing 24 analysts recently revising their earnings estimates upward for the upcoming period. The firm's analysts cited several factors contributing to their positive outlook, including what they describe as a "rare convergence of long-term secular tailwinds, positive quarterly checks, and an attractive financial set-up."
Twilio, known for its cloud communications platform, has seen its stock performance soar over the past quarter, with a notable 60% increase. According to InvestingPro data, the stock has delivered an impressive 87.33% return over the past six months and is currently trading near its 52-week high of $116.43. The company's overall financial health score stands at "GREAT," supported by strong liquidity and balance sheet metrics.
Wolfe Research attributes this success to fundamental stabilization and anticipates a "secular acceleration" in the near future. The firm's channel checks suggest an exceptionally strong fourth quarter for Twilio, with solid performance across both core communications services and newer products such as Branded Calling. The analysts also noted positive developments in the WhatsApp channel.
The guidance provided by Twilio for the fourth quarter, which forecasts a 7.3% year-over-year increase, is viewed by Wolfe Research as conservative. The analysts believe that Twilio is positioned to significantly outperform this guidance, potentially achieving more than a 10.5% year-over-year growth.
Beyond the immediate quarter, Wolfe Research sees Twilio benefiting from the Agentic and VoiceAI themes, positioning the company to capitalize on the increasing volumes of voice communication and value-added services related to conversational intelligence. The analysts highlighted Twilio's partnership with OpenAI, pilot customers, and new features like Conversational Relay as tangible positive signals.
Furthermore, the analysts speculate that Twilio remains an attractive target for strategic mergers and acquisitions by larger SaaS incumbents, hyperscalers, or scaled internet companies. While trading at an EV/EBITDA multiple of 128.65x, InvestingPro's Fair Value analysis suggests the stock still has room for upside. Get access to the complete financial analysis and 13 additional ProTips for Twilio, along with comprehensive research reports covering 1,400+ US stocks, by subscribing to InvestingPro. If Twilio can accelerate and sustain a double-digit growth rate, Wolfe Research sees approximately 40% upside potential for the stock.
Looking ahead to Twilio's Investor Day, the analysts expect the event to serve as a positive catalyst for the stock. They predict that Twilio will reveal multiple growth levers and potentially present a revitalized financial framework. Wolfe Research reiterated its Outperform rating and emphasized the raised price target, signaling strong expectations for Twilio's future performance.
In other recent news, Twilio's Q3 2024 revenue saw a 10% year-over-year increase, reaching $1.13 billion, with a substantial contribution of $1.06 billion from its Communications segment. The company's non-GAAP income from operations also rose to a record $182 million. Twilio's Chief Legal Officer, Dana Wagner, has announced his resignation, effective from January 1, 2025, with no successor named yet.
On the analyst front, Twilio's stock was upgraded to Buy by Tigress Financial Partners and Monness, Crespi, Hardt, with a new price target set at $135. Baird maintained a neutral rating but raised its price target for Twilio to $115.
Twilio has also launched a public beta release of Linked Audiences for Amazon (NASDAQ:AMZN) Redshift, a feature aimed at boosting customer engagement. This development has contributed to a 35% year-over-year increase in Twilio Segment's growth in the AWS Marketplace. The company's ongoing integration of artificial intelligence and machine learning across its platform has been key to improving its product offerings.
Looking forward, Twilio projects a revenue growth of 7% to 8% for Q4 and fiscal 2025 and expects significant non-GAAP operating margin expansion in 2025. The company has also completed over $2.7 billion in aggregate repurchases as part of its $3 billion share repurchase authorization.
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