In the midst of a technology stock sell-off, Twilio Inc. stands out with an upgrade from Argus Research. Analyst Jim Kelleher believes that Twilio will emerge as a winner in the field of artificial intelligence (AI), which is one of the reasons for his decision to upgrade the stock from hold to buy. Kelleher has set a price target of $72, which is 16% higher than the current levels.
Kelleher sees AI as a crucial catalyst for Twilio’s business, as clients are increasingly looking for ways to enhance the capabilities and efficiency of their customer-communications tools. In his analysis, Kelleher draws inspiration from positive trends in the broader technology ecosystem, indicating that customers may have more budget flexibility to invest in Twilio’s offerings. These offerings include messaging, voice, and email tools for customer communications.
Furthermore, Kelleher highlights the recovery in digital advertising spending within major media companies like Meta, Alphabet, and Amazon. Based on this environment, he predicts that Twilio’s clients will increase their spending on customer engagement platforms and business tools that enable cloud-hosted telephone contact, texting, and other direct-to-consumer messaging methods.
Kelleher expresses optimism about the customer engagement products market, stating that it has stabilized and is poised for growth moving forward. He also acknowledges the progress Twilio has made in cutting costs, resulting in improved margins. Although the company is not yet GAAP profitable, Kelleher notes that the losses are decreasing. Notably, Twilio has achieved two consecutive quarters with adjusted operating margins exceeding 10% for the first time since going public.
Despite the overall downturn in the technology sector, Twilio saw its shares rise by 2.3% during Friday’s session. In contrast, the Nasdaq Composite Index experienced a 0.6% decline. As of 2023, Twilio’s shares have gained 27%, outperforming the S&P 500 (16%) and the Nasdaq (30%).
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