Twilio's Turnaround Story Is Underway, Analyst Turns Bullish And Boosts Price Forecast

Goldman Sachs analyst Kash Rangan upgraded the shares of Twilio Inc TWLO from Neutral to Buy and raised the price target from $77 to $185 ahead of its fourth-quarter earnings results.

After several years of slower growth and strategic shifts, the analyst notes Twilio is now at a turning point, both in terms of its narrative and financial performance.

Twilio’s significant cost-cutting efforts and ongoing efficiency initiatives are positioning the company for strong free cash flow generation.

The analyst’s optimism stems from three key factors, including improved go-to-market strategies, clear product innovation, and strong financial discipline.

Additionally, the analyst anticipates an improved growth trajectory and expects Twilio to experience positive revisions to both revenue and earnings, especially given the conservative CY25 guidance of 7-8% growth, with usage trends improving and growth accelerating to over 10% in the second half of fiscal 2024.

The analyst notes the company will need to surpass its initial CY25 revenue growth forecast of 7-8% to unlock significant upside from current levels, as the stock has already surged 89% over the last 12 months.

The Analyst Day reinforced the evolving outlook on Twilio, showcasing faster product development and enhanced go-to-market strategies.

Improvements to its Communications portfolio should help Twilio solidify its leadership in the core CPaaS market, while the introduction of CDP-powered Communications products expands its total addressable market and opens up numerous AI-driven use cases, notes the analyst.

With its turnaround in progress, the analyst sees solid upside potential for revenue and FCF growth in CY25, making the stock attractive at a 21x EV/FCF multiple for CY26.

Price Action: TWLO shares are trading higher by 2.6% at $139.77 at the last check Monday.

Read Next: