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Twilio’s (NYSE:TWLO) stock rose about 6% on Friday after second quarter results beat estimates, drawing positive analysts’ reactions.
Piper Sandler reiterated its Overweight rating and $83 price target on the stock.
Analysts led by James Fish noted that it was a quarter of slight reported revenue reacceleration, improvements in both business units, and a significant raise to the FY’24 EBIT and free cash flow, or FCF, targets.
Twilio is seeing early signals of success from its go-to-market and operational initiatives, an opportunity for packaging solutions together to encourage cross-sell and stickiness, and sees significant room for incremental operating income leverage, according to the analysts.
The analysts added that ‘messiness’ is finally removed from the business, as reported revenue is set to equal organic revenue moving forward, leaving bulls with expanding EBIT/FCF, revenue reacceleration, and prudent targets for continued beat and raises.
Twilio did a lot to “prove it” this quarter, according to the analysts, and with revenue and operating income upside opportunity, the analysts continue to believe the risk-reward remains positive.
Stifel kept its Hold rating on the stock with a $60 price target.
The analysts said that results were well ahead of expectations across the board in the second quarter as the company noted solid performance in messaging, acceleration in email growth, and strong independent software vendor, or ISV, contributions.
After a weaker international mix in the first quarter, the company noted quarter-over-quarter improvements overseas. The analysts added that partnership agreements are increasing in importance at the company. Twilio announced expanded co-sell partnerships with Klaviyo, Braze, Airship, and Insider, which the analysts expect will be a long-term benefit.
In the near-term, ISVs, self-service enhancements, and cross-sell opportunities are expected to fuel growth. While Segment metrics remain underwhelming, enhancements like improved time-to-value and data warehouse interoperability were highlights, and a 700bp improvement in operating margins. Overall, management’s focus remains on running the business with increased rigor, according to the analysts.
Meanwhile, Oppenheimer reiterated its Outperform rating and $65 price target.
Analyst Ittai Kidron and his team noted that Twilio reported a second quarter beat on stable messaging volumes and accelerating email revenues within Communications. In addition, continued headcount optimization and prudent cost management led to strong operating margin performance.
Partly offsetting the upbeat quarter was a tepid top-line guide, with management modestly lowering expectations for CY24, as per the analysts.
That said, the analysts see a slow and steady improvement in Communications that can benefit from adoption of contextual data for AI, and significant cross-selling of segment.
The company’s management also continues to improve profitability and generate cash even in a low growth environment. The analysts see value in the portfolio and cross-sell opportunities, with more leverage to expand margins even more.
Morgan Stanley has kept its Equal-weight rating on the stock but raised the price target to $65 from $60.
Analyst Meta Marshall and her team said that the company outperformed in the second quarter, with Comms seeing incremental demand stability, while more meaningful upside was around operating margins, beating Morgan Stanley’s estimates by about 300 bps, and indicating more upside is possible.
The analysts noted that they remain Equal-weight until Twilio proves it can reaccelerate revenue post drive for operational efficiency, but they have walked away encouraged after the results.
Twilio’s (TWLO) has a Strong Buy rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors’ average rating is Buy, and the average Wall Street analysts’ rating is Hold.
