Twilio stock price continued its upbeat performance, soaring to $112, its highest level since May 2022. TWLO shares have surged by over 140% from the lowest level in 2023, bringing its valuation to over $17 billion. So, do the Twilio shares have more upside?
Twilio’s business is doing well
Twilio is a leading player in the software industry that offers communication solutions to thousands of companies globally. It works behind the scenes, and solves solutions for companies like Yelp, Jack Henry, Indeed, Crypto.com, and Zendesk.
Twilio’s core solution helps companies send messages to millions of people at once. It has also introduced voice solutions, enabling them to make, receive and monitor calls globally.
Twilio has also expanded its solutions to the email industry. Its Sendgrid solution helps companies to collect email data and send bulk emails to many companies.
The company’s business has been doing well in the past few years as demand for messaging has grown. Its annual revenue jumped from over $1.13 billion in 2019 to over $4.15 billion in 2023, and $4.3 billion in the trailing twelve months.
The most recent quarterly results showed that Twilio’s revenue rose by 10% to $1.13 billion, while its gross margin moved to 52.9%. This growth happened as the number of companies using its solutions jumped to 320,000.
No longer a growth company
The main challenge for Twilio is that its business is no longer growing as it did a few years ago, when it used to grow by double digits.
Analysts expect Twilio’s revenue to grow by 7.75% in the fourth quarter, reaching a high of $1.16 billion. Its annual revenue is expected to be $4.42 billion, a 6.46% increase from what it made a year earlier.
Twilio’s revenue is also expected to grow gradually in the next few years, with its annual figure expected to rise by 7.6% in 2025.
Most importantly, the company is on a path towards profitability. Its quarterly loss dropped to $9.7 million in the last quarter, a big improvement from the $141 million it made in the same period last year.
Analysts expect Twilio’s earnings per share to reach $3.67 this year and $4.29 in 2025. The company anticipates that its free cash flow will be between $650 million and $675 million. This path to profitability is partially due to the layoffs it implemented in 2023.
Still, a challenge is that its business seems relatively overbought. Its net income margin is minus 10%, while the revenue growth is 5.7%. As such, the rule of 40 metric is much lower than 40, meaning that it is overvalued.
The same is true with analysts’ estimates. The Twilio stock forecast by analysts is $111.38, higher than the current $94
Twilio stock price analysis
TWLO stock chart by TradingView
The weekly chart shows that the TWLO share price made a strong bullish breakout in the past few months. It has crossed the upper side of the ascending trendline, which connects the highest swings since 2023. By moving above that level, the stock invalidated the rising wedge pattern that was forming.
Twilio has moved above the 50-week Exponential Moving Average (EMA), a sign that bulls are gaining control.
Therefore, the stock will likely continue rising, with the next point to watch being at $136, the 23.6% retracement level.
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