Twilio Is Up 21% But Could Still Climb Another 16% According to Wall Street Expert

Shares of Twilio (NASDAQ:TWLO | TWLO Price Prediction) are surging 21% in morning trading Friday after the  internet services and infrastructure company reported preliminary results for the fourth quarter and full year of 2024.

Analysts were raising their ratings on the stock to outperform while Baird analyst William Power hiked his one-year price target from $115 per share to $160 per share, a 39% increase. TWLO stock is trading at $137.69 at 11:00 a.m. after closing yesterday at $113.40 per share. That translates into 41% upside.

What happened?

Twilio said Q4 revenue rose 11% over the year-ago period, which implies sales of around $1.2 billion. It also said it would have positive GAAP operating earnings while adjusted income from operations would exceed the high-end of the guidance it provided at the end of the third quarter.

The communications platform-as-a-service (CPaaS) stock had said it expected non-GAAP operating earnings to be in a range of $185 million to $190  million, which was already a massive improvement over the $172.6 million in adjusted earnings it reported last year. It still expected to generate between $650 million and $675 million in free cash flow.

Twilio expects to report its final numbers on Feb. 13, though its stock is already gaining momentum today. Both investors and Wall Street seem bullish, continuing the run higher begun after third-quarter results last October.

What it means for the stock

The CPaaS company is nearing profitability on a GAAP basis. Twilio shrunk losses in Q3 from $141.7 million to below $10 million. There was a similar dramatic reduction in the second quarter, which at this rate could see TWLO break-even or report a small profit.

Wall Street is enthused by its progress. Citing William Blair analyst Arjun Bhatia’s note to investors, Barron’s said the company had the potential to grow into a “much more profitable business.” The analyst reiterated his outperform rating, but doesn’t have a price target on the stock. He found the stock’s valuation attractive because of its ability to produce cash profits and grow revenue. 

While Baird’s Power found Twilio’s valuation “reasonable,” but narrowing losses, robust cash flows, and improving capital margins warranted the target price increase.

Key takeaways

Twilio.is benefiting from integrating artificial intelligence into its apps with over 300,000 companies using its technology, including many of the tech sector’s top growth stocks. According to Power, AI-related companies spent $260 million on Twilio in the last 12 months.

What is especially hopeful for the CPaaS stock is that he thinks that was mostly spent on Twilio’s older products. “AI-driven products, including voice and messaging bots running on TWLO, could present a growing opportunity,” he told investors.

Although the consensus outlook is still a hold rating, those analysts reacting to today’s preliminary update all boosted their price targets to an average $147.5 per share, 7% higher than where it currently trades.