William Blair maintains Outperform on Twilio stock post-Q4 results

Published 14/02/2025, 14:22
William Blair maintains Outperform on Twilio stock post-Q4 results

On Friday, William Blair analyst Bhavan Suri maintained an Outperform rating on Twilio shares (NYSE:TWLO). Suri highlighted the company's solid fourth-quarter performance, which aligned with expectations set during its January analyst day. Twilio reported an 11% revenue increase for the quarter and reiterated its 2025 guidance projecting 7%-8% growth. The company has shown consistent improvement in organic revenue growth each quarter throughout 2024, signaling stronger execution and increased demand for its services. According to InvestingPro data, Twilio's stock has surged over 103% in the past year, trading near its 52-week high of $151.95.

Twilio's operating margin reached 16.5%, despite a one-time bad-debt write-off that created a 140 basis point headwind. The free cash flow for the quarter was $94 million, which fell short of the consensus estimate of $106 million. This figure was impacted by an additional $130 million in vendor prepayments. The communications segment, which accounts for over 90% of Twilio's revenue, grew by 12% this quarter. In contrast, the Segment division saw a 1% decline. InvestingPro analysis shows the company maintains a strong financial position with a current ratio of 5.06, indicating robust liquidity, and holds more cash than debt on its balance sheet.

The communications business saw momentum from various areas, including an uptick in messaging, robust growth in email, and strong performance from ISV partners and the self-serve business. The Communications net revenue retention (NRR) increased by 2 percentage points sequentially to 108%, marking the highest level in the past six quarters since the company began reporting this metric. Management has confirmed its target to achieve an operating margin between 21%-22% by 2027. For deeper insights into Twilio's financial health and growth potential, InvestingPro subscribers can access 15+ additional ProTips and comprehensive valuation metrics in the Pro Research Report.

Suri noted that while the results met expectations, some investors might have anticipated an upward revision to the 2025 revenue guidance. However, the analyst sees the current quarter as a strong one, with accelerating revenue trends, enhanced execution, and significant potential for margin expansion. With 14 analysts recently revising their earnings estimates upward and the stock receiving an overall "GREAT" financial health score from InvestingPro, Suri suggests that investors should consider buying on any substantial dips in the stock price, reiterating the firm's positive stance on Twilio.

In other recent news, Deepseek, a new AI tool, has been creating a buzz in the software industry, potentially benefiting software vendors, according to Bernstein. This AI tool's performance and cost efficiency could drive higher demand for AI applications. Bernstein suggests that this trend will favor companies providing software infrastructure, including Twilio, and predicts an increase in the number of viable projects and a faster pace of project deployment into production.

In related developments, analysts from Needham, BofA Securities, Stifel, and TD Cowen have recently provided their insights on Twilio. Needham raised their price target for Twilio to $165, citing the company's promising growth narrative and anticipated improvements in financial performance. Meanwhile, BofA Securities increased their price target to $77, but maintained an underperform rating due to concerns about Twilio's current market valuation.

Stifel also raised their price target to $130, noting Twilio's potential in the customer experience sector amid rapid changes driven by AI proliferation. Lastly, TD Cowen increased their price target to $140, highlighting Twilio's encouraging financial framework for 2025-2027 and improvements in margins and free cash flow. These updates reflect recent developments in Twilio's performance and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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