On Wednesday, Bernstein analysts adjusted their outlook on Twilio Inc. (NYSE:TWLO) shares, a cloud communications platform, by reducing its price target to $68 from the previous $70, while maintaining a Market Perform rating on the stock.
The revision follows Twilio's first-quarter performance, which, despite surpassing its own guidance and consensus estimates on revenue, presented a modest quarter-over-quarter contraction.
Twilio's Q1 2024 revenue declined by 2.7% quarter-over-quarter, which was better than the forecasted 4.3% decrease. The company has projected a slight growth of 0.76% for Q2 2024.
Analysts pointed to the Segment business unit as a key area of concern, noting its decreasing net revenue retention (NRR) of 92% and a shrinking customer base.
The Communications business unit, which now includes Flex (NASDAQ:FLEX) and marketing along with other services, was also cited as showing minimal positive growth. It reported a 4% year-over-year increase and a NRR of 103%. However, this figure is affected by a recent divestiture; without this factor, the growth would have been approximately 7% year-over-year.
The analyst's remarks highlighted the mixed results within Twilio's business units, indicating challenges in achieving stronger growth. The performance of the Segment unit, in particular, was emphasized as a drag on the company's overall performance, while the Communications unit's growth was acknowledged, albeit as modest.
InvestingPro Insights
Twilio Inc. (NYSE:TWLO) has demonstrated a mixed financial landscape, yet certain metrics suggest a potential for resilience and growth. With a market capitalization of $11.07 billion, the company holds a compelling position in the cloud communications sector. Notably, Twilio's aggressive share buyback strategy, as highlighted by an InvestingPro Tip, underscores management's confidence in the company's value. Moreover, the company's balance sheet reflects financial prudence, holding more cash than debt, a reassuring sign for investors considering the current economic climate.
Despite not being profitable over the last twelve months, Twilio's revenue growth has been steady, with an 8.56% increase year-over-year as of Q4 2023, and analysts have revised their earnings upwards for the upcoming period, anticipating profitability this year. This aligns with the company's strategy to focus on long-term growth. The InvestingPro Tip indicating a high shareholder yield further suggests that Twilio is committed to delivering value to its investors.
For those seeking a comprehensive analysis, InvestingPro offers additional insights with 17 analysts providing upward earnings revisions and more tips on the company's financial health. To delve deeper into Twilio's potential and explore these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.