On Tuesday, Bernstein SocGen Group has updated its outlook on Twilio (NYSE:), raising the price target to $70.00 from $68.00, while keeping a Market Perform rating on the stock. The company has shown a slight year-over-year growth acceleration in its second fiscal quarter of 2024, increasing to 4.3% from 4.0% in the previous quarter. This improvement is attributed to Twilio’s renewed focus on its Communications business and positive trends in various segments.
Twilio has reported growth in its organic self-serve, email, messaging, and ISV offerings. It is also expected to overcome the negative impact of phasing out Zipwhip by the end of 2024, which had been a headwind to the Net Revenue Retention (NRR) rate, reducing it to approximately 50 basis points in the fourth quarter, and to nearly zero in the first quarter of 2025.
The company has guided for an acceleration in growth through the end of the year, forecasting a 5.5% increase in the third quarter and 6.6% year-over-year in the fourth quarter.
Despite a revenue beat, Twilio has revised its full-year growth forecast, lowering the midpoint year-over-year guide from 7.5% to 6.5%, and narrowing the range from 5-10% to 6-7%. The Segment’s NRR stood at 93% this quarter, and while the company has not confirmed a deceleration bottom, it remains cautious.
Twilio also reported a significant non-GAAP operating margin beat of +260 basis points versus consensus, but it has indicated potential margin regression in the upcoming third and fourth quarters.
Analysts expect the company to continue delivering modest margin expansion, but note that the lower gross margins in the low 50% range and slow revenue growth may limit the pace of this expansion. With risks present on both sides of the revenue model and the one-year price target close to the current trading price, Bernstein SocGen Group remains neutral on the stock.
InvestingPro Insights
Twilio (NYSE:TWLO) has been under the microscope with a keen eye on its financial health and market performance. With a market capitalization of approximately $9.74 billion, the company has demonstrated resilience in its balance sheet, holding more cash than debt, which is a reassuring sign for investors concerned about financial stability. This is complemented by Twilio’s aggressive share buyback strategy, as noted in InvestingPro Tips, which could signal management’s confidence in the company’s valuation and future prospects.
InvestingPro Data reveals a revenue growth of 4.31% for the second fiscal quarter of 2024, aligning with the year-over-year growth acceleration reported in the article. Despite not being profitable over the last twelve months, analysts are optimistic, predicting profitability within this year. This optimism is further reflected in the company’s EBITDA growth, which has surged by 108.65% in the same period. It’s also worth noting that Twilio’s liquid assets exceed its short-term obligations, suggesting a strong liquidity position that could support its operational needs and investment strategies.
For investors looking for more comprehensive analysis and future outlooks, there are additional InvestingPro Tips available, including insights on valuation, profitability, and shareholder yields. These tips, along with real-time data and metrics, can be accessed through InvestingPro’s platform, offering a deeper dive into Twilio’s financial landscape and investment potential.
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