RBC Capital maintains Twilio stock rating at Underperform with $75 target

Investing.com - RBC Capital reiterated its Underperform rating on Twilio (NYSE:TWLO) with a price target of $75.00 following a group call with company management and investors. According to InvestingPro data, the company currently trades at elevated multiples with a P/E ratio over 800x, though it maintains strong financial health with a current ratio of 4.9x.

The firm reported coming away "incrementally positive" on Twilio’s path to sustaining double-digit growth, which it attributes to messaging share gains and early traction in cross-selling and AI-enabled voice offerings. This aligns with the company’s recent performance, showing 11.6% revenue growth in the last twelve months.

RBC noted that Twilio faces near-term gross margin pressure from carrier fee increases, though management outlined several offsetting strategies including pricing actions, cloud cost optimization, and multi-product platform selling.

The research firm highlighted that partnerships, such as with Microsoft, and Twilio’s "neutral, model-agnostic posture" support the company’s platform narrative, while share buybacks remain the top capital allocation priority over transformational acquisitions.

RBC’s $75 price target implies approximately 11 times calendar year 2026 estimated free cash flow, with the firm making slight updates to its margin estimates while maintaining its Underperform stance.

In other recent news, Twilio has reported its fifth consecutive quarter of revenue acceleration, achieving double-digit revenue growth. Despite this positive momentum, Stifel has maintained a Hold rating with a $110 price target, citing concerns over margin pressure. Additionally, Bernstein SocGen Group has lowered its price target for Twilio from $130 to $119, maintaining a Market Perform rating due to past challenges in revitalizing growth. On a more positive note, Rosenblatt Securities has initiated coverage on Twilio with a Buy rating and a $140 price target, highlighting the company’s potential for profitable growth and significant free cash flow generation.

Twilio has also made strides in its service offerings by launching Rich Communication Services (RCS) messaging globally, enhancing customer engagement with interactive features. This service is now available to over 349,000 active customer accounts. Furthermore, Twilio is set to be included in the S&P MidCap 400 index, replacing Amedisys Inc., a move that follows UnitedHealth Group’s acquisition of Amedisys. These developments reflect Twilio’s ongoing efforts to strengthen its market position and expand its service capabilities.

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