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On Wednesday, TD Cowen analyst Derrick Wood adjusted the price target for Twilio shares (NYSE:TWLO), reducing it to $100 from the previous $140, while maintaining a Hold rating on the stock. Currently trading at $86.64, Twilio has shown significant volatility, with InvestingPro data showing a 49% gain over the past year despite an 18% decline year-to-date. The revision comes as Twilio is perceived to be increasingly sensitive to macroeconomic conditions. Wood’s analysis suggests that while a modest upside to Twilio’s first-quarter performance is expected, there is risk to future guidance due to macro developments.
Twilio, which is scheduled to report its first-quarter earnings on May 1, 2025, operates on a consumption model that makes it vulnerable to economic shifts. According to InvestingPro analysis, the company maintains strong financial health with a current ratio of 4.2 and more cash than debt on its balance sheet. Its services often fall under discretionary marketing budgets, and the company has significant international exposure, factors that heighten its sensitivity to the global economic climate. InvestingPro subscribers have access to 10+ additional key insights about Twilio’s financial position.
Despite the challenges, Twilio has an emerging story tied to its role in the Agentic AI stack. While Wood believes that this aspect of Twilio’s business is still in its early stages and unlikely to significantly impact the company’s financials in the short term, analysts project the company will turn profitable this year with an EPS forecast of $4.44 for FY2025. The Hold rating is reiterated in light of these considerations.
Twilio’s shares have seen a significant retreat, dropping over 40% since their peak in February. The stock is now trading at approximately 12.5 times its estimated 2026 enterprise value to free cash flow (EV/FCF), while current EV/EBITDA stands at 70.6x. Based on InvestingPro’s Fair Value analysis, Twilio appears slightly undervalued at current levels. The lowered price target to $100 reflects around 14.5 times the projected 2026 EV/FCF, taking into account recent valuation pressures in the sector and the heightened risks to growth. Get the complete Twilio Pro Research Report, along with 1,400+ other detailed company analyses, exclusively on InvestingPro.
In summary, while Twilio continues to develop its growth narrative, particularly with its AI initiatives, macroeconomic dynamics are expected to limit the company’s upside potential in fiscal year 2025. The possibility of a modest reduction in Twilio’s outlook cannot be ruled out, leading to the new price target set by TD Cowen.
In other recent news, Twilio Inc. reported a noteworthy 11% year-over-year increase in Q4 2024 revenue, reaching $1.19 billion, with communications revenue rising by 12% to $1.12 billion. Despite a slight decline in segment revenue, Twilio achieved its first quarter of GAAP operating profitability. The company has also partnered with Cedar to enhance healthcare billing through AI, integrating Twilio’s communications technology to improve patient interactions and billing processes. Analyst firms have shown optimism, with Tigress Financial Partners raising Twilio’s stock target to $170, citing growth driven by AI initiatives. Piper Sandler maintained an Overweight rating with a $161 target, noting Twilio’s unique CXaaS platform and growth potential. Morgan Stanley (NYSE:MS) upgraded Twilio from Equalweight to Overweight, increasing their price target to $160, highlighting the company’s platform improvements and AI-driven growth strategies. These developments reflect Twilio’s strategic focus on AI and customer engagement, positioning the company for continued growth and profitability.
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