Twilio Inc (NYSE: TWLO) is ripping higher this morning after setting bullish targets for the next few years at an investor day on Thursday.
Shares of the cloud communications company have rallied as much as 150% over the past seven months – but a Baird analyst is convinced it’s not done pleasing its shareholders yet.
William Power sees Twilio stock pushing further up to $160 this year that indicates potential for another 20% upside from current levels.
Baird expects Twilio to beat estimates in Q4
Twilio shares opened about 20% up today after guiding for adjusted operating margin of 22% in 2027. In comparison, the metric stood at 16% only in its latest reported quarter.
Baird has been wary of chasing the recent strength in the cloud communications stock – but the investment firm now expects continued momentum in profitability and cash flow to unlock further upside in TWLO, its analyst told clients today.
William Power recommends owning Twilio Inc at current levels as he expects the company to come in ahead of estimates in its to-be reported quarter and raise guidance for the next one as well.
Nonetheless, Twilio stock does not pay a dividend that keeps it unattractive for income investors at writing.
Is Twilio stock expensive to own at current valuation?
Twilio Inc has experienced an explosive rally since last June but the Baird analyst continues to see it as reasonably valued at current levels considering the tailwinds.
William Power is positive on the San Francisco headquartered firm also because it offers exposure to continued expected growth in artificial intelligence.
9,000 AI companies and 90% of Forbes 50 AI startups are building on TWLO as a customer engagement layer, and AI related companies spent $260 million on Twilio in the last 12 months.
The company’s voice and messaging bots, he’s convinced, will accelerate growth in and help Twilio stock command a higher multiple moving forward.
AI could grow Twilio’s TAM to $158 billion
Twilio committed to generating about $3.0 billion in free cash flow through 2027 at its investor day – compared to less than $700 million only over the past three years.
The announcement triggered a massive surge in the company’s share price today because analysts had called for a much lower $2.76 billion of free cash flow for the next three years.
“If we execute well in 2025, I think we write our own story from 2026 on,” Khozema Shipchandler – the chief executive of Twilio Inc said in a recent interview with CNBC.
Focusing on expanding its footprint in conversational artificial intelligence could expand the company’s total addressable market from $119 billion to about $158 billion by the end of 2028, he added.
Investors should know, however, that Twilio stock is still down sharply from its peak of close to $450 in 2021.
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