Why Twilio Stock Jumped 20% Today
Key Points
TD Cowen analyst Derrick Wood reiterated his buy rating, calling Twilio's three-year turnaround complete.
Revenue from branded calling and conversational intelligence is currently doubling year-over-year, and trailing earnings are positive for the first time.
The stock jumped past Wood's $210 price target on the news itself.
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Shares of Twilio (NYSE: TWLO) were up by 20.4% at 3:21 p.m. ET, boosted by a bullish analyst note. After this jump, the stock has nearly doubled in 52 weeks.
TD Cowen says the turnaround is real
TD Cowen analyst Derrick Wood reiterated his "buy" rating on Twilio stock with a price target of $210. The stock closed last Friday's trading at $191 per share. Wood may need to reset his price target, as the report itself already lifted Twilio's stock price above it.
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After interviewing Twilio executives at last week's TD Cowen tech sector conference, Wood argued that Twilio's turnaround is complete after a 3-year "reset." The maker of software-building tools benefits from the AI boom. Twilio's strongest offerings at the moment include voice-driven commands, automated workflows, and flexibility with bring-your-own-LLM.
The numbers finally add up
Twilio's turnaround has been a long time coming. Top-line sales never stopped growing (though they did slow down in the inflation panic of 2023), but earnings and free cash flows were negative for a couple of years.
But the AI-powered rebound is also clear as day. Over the last four quarters, Twilio generated $899 million of free cash flow on revenues of $5.3 billion. For the first time in Twilio's history, bottom-line earnings turned positive last year.
Image source: Getty Images.
And these financial upticks could be the start of a much bigger story. Twilio CEO Khozema Shipchandler expects big things from conversational intelligence and other voice-controlled AI services.
"We expect voice AI use cases will continue to evolve to be more conversational and cross-channel over time," Shipchandler said in April's Q1 earnings call. "For example, software add-ons such as branded calling and conversational intelligence both grew revenue more than 100% year-over-year."
If Wood's thesis is right, Twilio's AI-powered voice tools are just getting warmed up. Only time will tell, but I like the company's focus on voice AI. The stock didn't wait for permission to start running.
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Anders Bylund has positions in Twilio. The Motley Fool has positions in and recommends Twilio. The Motley Fool has a disclosure policy.
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