On Friday, RBC Capital Markets analyst Rishi Jaluria increased the price target on Twilio stock (NYSE:TWLO) to $75 from the previous $50, while maintaining an Underperform rating. The adjustment came after Twilio's Investor Day in San Francisco, where the company presented new financial targets and preliminary positive results for Q4, which sent shares up by 15% in after-hours trading. Currently trading at $113.40, Twilio has demonstrated remarkable momentum with a 101% gain over the past six months. According to InvestingPro analysis, the stock is currently trading near its 52-week high of $117.92.
Twilio disclosed its detailed guidance for 2025, which slightly surpasses consensus on profitability. The company also outlined a financial framework for 2027, aiming for a non-GAAP operating margin target of 21–22% and a cumulative free cash flow (FCF) target exceeding $3 billion. Additionally, Twilio announced an incremental $2 billion share repurchase authorization, building on management's aggressive share buyback strategy. The projected operating margin expansion is based on an assumption of modest gross margin growth from its current level of 51%, although it is not a requisite for meeting the formal targets. InvestingPro data reveals the company maintains strong financial health with a current ratio of 5.06, indicating robust liquidity.
The company’s conservative approach to growth was evident during the Investor Day, and the preliminary Q4 results were positively received. Twilio also shared encouraging metrics related to independent software vendors (ISVs) and its self-serve platform. Despite these positive indicators, RBC Capital Markets expressed caution regarding the competitive landscape, the sustainability of growth, and the potential benefits from artificial intelligence (AI) initiatives.
In his commentary, Jaluria acknowledged Twilio's solid profitability targets and conservative growth framework. However, he also noted concerns about the stock's valuation, stating that the shares are trading at 8 times enterprise value to estimated CY25 gross profit. The new price target of $75 implies a 4 times multiple, indicating RBC Capital Markets' cautious stance on Twilio's market position and future prospects. While the stock trades at a high EV/EBITDA multiple of 130x, InvestingPro analysis suggests the stock is currently undervalued based on its proprietary Fair Value model. Investors seeking deeper insights can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which covers detailed valuation analysis and 13+ additional ProTips for Twilio.
In other recent news, Twilio has experienced a flurry of activity with several analyst firms upgrading their price targets. Scotiabank (TSX:BNS) increased its price target for Twilio to $160, citing the company's robust fourth-quarter results and positive future prospects. Similarly, JMP Securities raised its price target to $165, while Baird upgraded its rating on Twilio from Neutral to Outperform, with a leap in the price target to $160.
These upgrades follow Twilio's preliminary fourth-quarter results, which surpassed expectations, and the company's announcement of a $2 billion share buyback plan, signaling management's confidence in future growth. Other recent developments include the integration of Segment with its Communication platform, adding more automation, AI enhancements, and an organizational realignment.
In line with these developments, Oppenheimer raised its price target for Twilio to $160, and Mizuho (NYSE:MFG) Securities increased its price target to $150, both firms maintaining an Outperform rating. These upgrades are based on Twilio's initiatives and the company's commitment to double-digit revenue growth. Twilio's Q3 2024 revenue saw a 10% year-over-year increase, reaching $1.13 billion, largely attributed to its Communications segment. These are the recent developments for Twilio.
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