Twilio Poised For Gradual Improvement Despite Challenges, Revenue Growth And Margin Expansion Key Focus

Twilio Inc TWLO reported third-quarter revenue of $1.03 billion, which beat the consensus estimate of $989.28 million. The company's top-line results were up 5% on a year-over-year basis. 

Mizuho analyst Siti Panigrahi reiterated the Neutral rating on Twilio, raising the price target to $60 from $55.

Panigrahi remains particularly encouraged by margin expansion but is waiting to see a revenue reacceleration trend.

The analyst writes that the recovery in Communications will be largely tied to an improvement in the macro (given its usage-based model),

According to Panigrahi, while TD&A booking trends are expected to improve further in Q4, the analyst doesn't see a material reacceleration to drive meaningful improvements in at least H1 2024 for Twilio's "growthiest" segment. 

Additionally, the resignation of Elena Donio could create additional distraction within TD&A until a permanent replacement is announced, the analyst adds.

Following the Q3 results, the analyst raised FY23 revenue estimates to $4.115 billion from $4.078 billion and FY23 EPS to $2.15 from $1.69.

Oppenheimer analyst Ittai Kidron reiterated the Outperform rating on TWLO, with a price target of $75.

Following the Q3 results, the analyst sees a bottom forming in 4Q as Twilio laps headwinds in crypto customer usage (200bps 4Q headwind), while usage volumes stabilize, and bookings improve in Data & Applications. 

Net, the analyst writes that despite operational challenges ahead and a still-uncertain macro future, the risk/reward is positively skewed.

Per Kidron, Twilio is poised for strong growth as it benefits from rapid adoption of application-to-person (A2P) communication in both modern and legacy applications. Twilio is leveraging its successful developer-focused, land-and-expand sales model, Kidron adds.

Following the Q3 results, the analyst raised the FY23 revenue estimate to $4.1 billion from $4 billion. Kidron also increased its FY23 EPS estimate to $2.13 from $1.68.

Stifel analyst J. Parker Lane reiterated a Hold rating on Twilio, with a price target of $60.

The target price is based on a 1.7x EV/Revenue multiple on the analyst's FY24 estimate. 

The analyst cautions the heightened level of competition in the CPaaS market, slower-than-expected adoption of the company's emerging engagement application portfolio (Flex, Segment, Frontline, Engage) and a weakening macro environment.

The analyst sees FY23 revenues of $4.12 billion, with EPS of $2.16. For FY24, the analyst sees EPS of $2.87 with revenues of $4.40 billion.

KeyBanc Capital Markets analyst Thomas Blakey reiterated the Sector Weight rating on TWLO following quarterly results.

While the analyst is encouraged with stabilization albeit continued deceleration in TD&A and possible conservative guide in the TC segment into 4Q23, Blakey remains skeptical that the company has firmly established a positive, consistent trajectory in becoming a communications and data company at this juncture.

Following the quarterly results, the analyst estimates FY23 EPS of $2.13, up from the prior forecast of $1.78, projecting FY23 revenues of $4.114 billion from $4.044 billion. 

Needham analyst Ryan Koontz lowered the price target on Twilio to $70 from $75, maintaining the Buy rating.

TD&A President Elena Donio, hired just 18 months ago to lead enterprise sales, will now depart, raising concerns of whether TWLO can organically transform its GTM, the analyst cautions.

Despite the promise of segment's strong product position in CDP and potential value-add insertion in the AI value chain, the analyst now sees greater sales execution risk for the stock.

However, the analyst raised FY23 revenue estimate to $4.112 billion from $4.016 billion.

Price Action: TWLO shares are trading higher by 1.36% to $56.50 on the last checked Thursday.