Two 59%+ winners, four above 25% in Aug – How this AI model keeps picking winners
On Monday, Morgan Stanley (NYSE:MS) upgraded Twilio stock, listed on the New York Stock Exchange under the ticker (NYSE:TWLO), from Equalweight to Overweight and increased its price target to $160 from $144. The upgrade follows a recent sell-off of Twilio shares, which have declined about 8.7% in the past week, after the company’s fourth-quarter results. According to InvestingPro data, Twilio maintains a "GOOD" overall financial health score, with particularly strong metrics in growth and cash flow management. Morgan Stanley analysts believe this presents a compelling opportunity for investors.
The firm’s analysts are optimistic about Twilio’s prospects for growth and profitability. Following Twilio’s Analyst Day in January, Morgan Stanley acknowledged the company’s potential but sought further evidence to support their confidence, especially after the stock’s significant gains. InvestingPro data shows Twilio has achieved a 7.3% revenue growth in the last twelve months, with analysts expecting continued growth this year. The company also maintains a strong balance sheet, holding more cash than debt, which provides financial flexibility for future growth initiatives.
Their increased confidence is based on conversations with a Twilio channel partner and a customer, which highlighted the company’s unique platform, signs of improvement in go-to-market strategies in the second half of 2024, and the potential for new products and artificial intelligence to drive growth. These factors have led Morgan Stanley to believe in Twilio’s ability to enhance cross-selling motions and to project a compound annual growth rate (CAGR) of around 10% for revenue, with operating margins exceeding expectations.
Morgan Stanley anticipates that Twilio’s stock will benefit from revisions in earnings estimates and a valuation multiple more aligned with profitable SaaS peers that are experiencing growth rates of approximately 10-13%. These peers currently trade at an average of around 24.5 times their forecasted 2026 free cash flow, compared to Twilio’s base case multiple of roughly 22 times and current valuation closer to 19 times.
The analysts concluded that as Twilio’s narrative of reacceleration and growth is substantiated, the stock has an approximate 28% upside potential, justifying the upgrade to an Overweight rating and the elevated price target.
In other recent news, Twilio’s fourth-quarter earnings report has drawn attention from several analyst firms, each adjusting their price targets for the company. Piper Sandler raised its price target to $161, maintaining an Overweight rating, citing stable growth driven by customer expansion and a positive outlook on Twilio’s financial performance. Stifel also increased its price target to $135, while maintaining a Hold rating, noting that the company’s earnings were slightly below market expectations but highlighted the potential for growth from AI applications in customer engagement. Bernstein raised its price target to $119, maintaining a Market Perform rating, and observed a revenue growth increase to double digits, despite challenges anticipated in the first quarter of 2025.
William Blair maintained an Outperform rating, emphasizing Twilio’s solid fourth-quarter performance and consistent improvement in organic revenue growth throughout 2024. The company reported an 11% revenue increase and confirmed its 2025 guidance, projecting 7%-8% growth. Twilio’s operating margin reached 16.5%, though impacted by a one-time bad-debt write-off, and the communications segment saw a 12% growth. Bernstein also noted that Twilio could benefit from the growing demand for AI-enabled services, particularly with the buzz around Deepseek, a new AI tool.
The potential for increased AI application demand could positively impact Twilio, as Bernstein identified it as one of the companies likely to benefit from lower AI costs and higher engagement. As Twilio focuses on executing its mid-term strategy and capitalizing on Customer Experience as a Service opportunities, analysts are closely watching its financial performance and growth potential. These developments highlight the varied perspectives from analysts on Twilio’s future prospects, with some expressing optimism about its growth trajectory and others maintaining a more cautious stance.
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