Twilio stock surges 22% after promising investor day outlook
Analysts are bullish on cloud communications providers.
The biggest gains on Friday were: Twilio (NYSE:TWLO) stock surged about 22% on the day, reaching nearly $139 per share.
A catalyst for the cloud communications provider was its investor day held on Thursday, which offered some promising outlook for the company’s future growth.
The company also released preliminary fourth-quarter results, which showed positive net income and strong top-line gains for the young company.
Twilio stock has surged 88% in the past 12 months. Can the rise continue in 2025?
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Twilio is a cloud communications company that provides a platform for developers and customers to build their own phone/voice, text/messaging, and video communications platforms.
The company was in growth mode with sales growing rapidly. However, the company was still not very profitable. Sales for the third quarter ended September 30 were $1.13 billion, up 10% from a year ago. However, the net loss was $10 million and the operating loss was $5 million. This is a significant decrease compared to a net loss of $109 million in the same quarter a year ago.
Twilio doesn’t report fourth-quarter earnings until February 13, but it released preliminary results this week in an 8-K SEC filing. Preliminary results for the fourth quarter are indeed promising, as Twilio expects an 11% revenue increase, well above previous expectations. Additionally, the company expects to post positive net operating income, which would result in its first quarterly net profit.
Investors grew more hopeful about Twilio’s growth prospects after the company’s investor day on Thursday.
The company is a leader in communications platforms as a service, in an industry expected to grow at a CAGR of 11% between now and 2028.
For Twilio, company officials expect double-digit annual revenue growth over time and non-GAAP operating margins of 21% to 22% by 2027. This is up from a non-GAAP operating margin of 16.1% in the most recent quarter. It is also expected to be profitable in fiscal 2025 and every year thereafter.
Twilio also expects cumulative free cash flow to reach $3 billion over the next three years. For fiscal 2024, Twilio is targeting free cash flow in the range of $650 million to $675 million, so we expect this number to increase significantly.
Invest in AI
Twilio has been investing heavily in AI to improve its services. We’ve invested in AI agents and technologies to make communication tools more predictable, automated, and faster, and to make interactions more powerful and personal.
Wall Street analysts were impressed with the company’s investor day presentation, as it received at least a dozen price target upgrades on Friday. The biggest gain came from Oppenheimer, which raised its price target by $70 per share to $160. This is a 17% increase from the current price.
Baird also raised his target for Twilio to $160 per share, citing its AI potential. “AI-based products, including voice and messaging bots running on TWLO, could present growing opportunities,” said William Power, an analyst at Baird, according to 24/7 Wall Street.
Power also cited Twilio’s reasonable valuation (forward P/E of 26). Considering its valuation and growth prospects, this is a stock to watch. Interested investors should call Twilio’s fourth quarter earnings report on February 14th.
