Analysts are bullish on the cloud communications provider.
The biggest gainer on Friday was Twilio (NYSE:TWLO) stock, which soared some 22% on the day to almost $139 per share.
The catalyst for the cloud communications provider was its investor day, held Thursday, which featured some promising projections about the company’s future growth.
The firm also released preliminary results for the fourth quarter, which showed positive net income and strong revenue gains for the young company.
Over the past 12 months, Twilio stock has surged 88% higher. Can it continue to rise in 2025?
Becoming profitable for the first time
Twilio is a cloud communications company that provides a platform for developers and customers to build out their own phone/voice, text/messaging, and video communication platforms.
The company has been in growth mode, with rapidly rising revenue. But the company has remained unprofitable. In the third quarter ended September 30, it grew revenue 10% year over year to $1.13 billion. However, it also had a net loss of $10 million and a net loss from operations of $5 million. That was down significantly from a net loss of $109 million in the same quarter a year ago.
While Twilio doesn’t report fourth quarter earnings until February 13, it released preliminary results this week in an 8-K SEC filing. The preliminary Q4 results are indeed promising as Twilio expects an 11% increase in revenue, which is well above previous projections. Further, the company anticipates positive net operating income, generating a quarterly net profit for the first time.
Investors were also more hopeful about Twilio’s growth prospects after the company’s investor day on Thursday.
The company is the leader in communications platform-as-a-service in an industry that is expected to grow at a compound annual growth rate of 11% between now and 2028.
As for Twilio, company officials anticipate double-digit annual revenue increases over time and a 21% to 22% non-GAAP operating margin in 2027. That would be up from a non-GAAP operating margin of 16.1% in the most recent quarter. Further, it expects to be profitable for fiscal 2025 and for each year after that.
Twilio also anticipates having $3 billion in cumulative free cash flow over the next three years. In fiscal 2024, Twilio is targeting free cash flow to be in the range of $650 million – $675 million, so the expectation is for that to grow significantly.
Investing in AI
Twilio has been investing heavily in AI to improve its service. It has invested in AI agents as well as technologies to make its communications tools more predictive, automated, faster, and its interactions more robust and personalized.
Wall Street analysts were impressed with the investor day presentation, as the company got at least a dozen price target upgrades Friday. The biggest bump came from Oppenheimer, which boosted the target by $70 per share to $160. That would be a 17% increase over the current price.
Baird also raised its target for Twilio to $160 per share, citing its AI potential. “AI-driven products, including voice and messaging bots running on TWLO, could present a growing opportunity,” said Baird analyst William Power, according to 24/7 Wall Street.
Power also cited Twilio’s reasonable valuation, with a forward P/E of 26. With its valuation, and growth prospects, it’s a stock to put on your radar. Interested investors should be dialed in to Twilio’s Q4 earnings report on February 14.