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Oppenheimer maintains Outperform rating on Twilio shares

EditorTanya Mishra
Published 10/22/2024, 08:29 AM
TWLO
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Oppenheimer has maintained an Outperform rating on Twilio (NYSE: NYSE:TWLO) and increased the price target to $85.00, up from the previous $65.00.

The firm anticipates Twilio to report third-quarter revenue that slightly exceeds the high-end of its guidance range of $1,085-1,095 million.

This estimated revenue represents a 5.4% year-over-year growth at the midpoint, compared to 4.3% in the second quarter of 2024 and 5.2% in the third quarter of 2023. The consensus estimate for the quarter stands at $1,095 million, which would mark a 5.9% year-over-year increase.

Despite facing macroeconomic pressures on its Communications business, which showed a flat Net Dollar Expansion Rate (NDER) of 102%, and a higher renewal contraction with Segment, indicated by an NDER of 93%, Twilio has managed to maintain a steady revenue growth rate of about 4-5% year-over-year for four consecutive quarters. The company has incorporated these challenges into its third-quarter and full-year 2024 guidance, which projects a 5-6% and 6-7% year-over-year growth, respectively.

Twilio has not anticipated a significant impact from election-related activities in the third or fourth quarter, as the company is cautious about this use case with its customers. However, there is an observed stabilization in consumption and revenue, which is seen as a positive sign. Twilio's management has also been focused on operational efficiency, including modifying sales incentives to emphasize gross profit, leading to more disciplined pricing.

In other recent news, Twilio Inc., a prominent cloud communications platform, reported a significant increase in its revenues, reaching $1.1 billion in the second quarter of 2024, primarily due to its Communications business, which contributed $1.01 billion. Despite this, Twilio revised its full-year growth forecast, lowering the midpoint year-over-year guide from 7.5% to 6.5%.

Additionally, Twilio has enhanced its executive severance plans, indicating preparation for potential significant corporate changes. The company also announced a partnership with OpenAI to improve its speech-to-speech capabilities through the integration of OpenAI's Realtime API, aiming to offer businesses more natural, real-time AI voice interactions.

In terms of analyst outlooks, Bernstein SocGen Group raised its price target for Twilio to $70.00, maintaining a Market Perform rating on the stock. Conversely, Tigress Financial Partners increased its 12-month price target for Twilio to $85, upholding a Buy rating.

InvestingPro Insights

To complement Oppenheimer's optimistic outlook on Twilio (NYSE:TWLO), recent data from InvestingPro offers additional context for investors. Despite the company's recent challenges, InvestingPro Tips highlight that Twilio holds more cash than debt on its balance sheet and has liquid assets exceeding short-term obligations. This financial stability could provide the company with the flexibility needed to navigate current market pressures and invest in future growth initiatives.

InvestingPro data shows Twilio's revenue for the last twelve months as of Q2 2024 reached $4.24 billion, with a modest growth rate of 4.62%. This aligns with the steady 4-5% year-over-year growth rate mentioned in the article. The company's gross profit margin stands at a healthy 50.67%, indicating strong pricing power despite competitive pressures.

While Twilio is not currently profitable, with an adjusted operating income of -$205.03 million over the last twelve months, InvestingPro Tips suggest that analysts predict the company will turn profitable this year. This projection, coupled with the company's focus on operational efficiency and disciplined pricing mentioned in the article, could signal a positive turning point for Twilio's financial performance.

For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Twilio, providing a deeper understanding of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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