On Thursday, Oppenheimer adjusted its outlook on shares of Twilio (NYSE:TWLO), a cloud communications platform, by reducing the price target to $65 from the previous $75 while maintaining an Outperform rating.
The firm anticipates Twilio to deliver second-quarter revenue for 2024 that aligns with the company's guidance of $1,050-1,060 million, which represents a 1.7% year-over-year increase at the midpoint, as well as meeting the market consensus of $1,058 million.
Twilio has been contending with macroeconomic challenges that have tempered growth and kept its Net Dollar Expansion Rate (NDER) stable quarter-over-quarter at 102%. Expectations are set for the NDER to remain at this level or to potentially rise modestly to 105% based on more favorable comparisons.
In terms of business segments, Communications, which encompasses messaging services, is projected to experience an organic growth of 4-5% year-over-year, with reported growth slightly lower at 1-2% year-over-year. The Segment division is forecasted to grow approximately 5% year-over-year.
The company has laid out plans to potentially double Segment's revenue growth over the coming quarters. These strategies include leveraging data warehousing, enhancing interoperability with Communications, and overhauling the sales and go-to-market approach.
Moreover, Twilio is aiming for non-GAAP operating break-even for this division by the second quarter of 2025, although significant improvements are only expected in the calendar year 2025.
Oppenheimer's stance reflects a neutral short-term perspective, acknowledging the persistent macroeconomic pressures. However, the firm is optimistic about Twilio's long-term prospects, expecting the company to boost its growth and profitability by reinvigorating Segment revenue in the lead-up to 2025. Despite the near-term challenges, the Outperform rating has been reaffirmed, albeit with a revised price target reflecting the current market environment.
In other recent news, Twilio Inc. has seen a series of financial adjustments from Wall Street firms. Piper Sandler cut its price target on Twilio to $77 from $79, maintaining an Overweight rating, citing a change in growth assumptions.
Meanwhile, Morgan Stanley (NYSE:MS) downgraded Twilio stock to Equalweight from Overweight due to concerns over near-term top-line catalysts, reducing the price target to $60 from $70. Despite these adjustments, Twilio reported a Q1 2024 revenue of $1.047 billion, marking a 7% year-over-year growth, and a non-GAAP income from operations of $160 million, a 54% increase from the previous year.
In other developments, Tesla (NASDAQ:TSLA) CEO Elon Musk is seeking to dismiss a lawsuit by former Twitter shareholders alleging a delay in disclosing his significant stake in Twitter. Musk's legal team argued the delay was due to a misunderstanding of the U.S. Securities and Exchange Commission's disclosure requirements. Musk's stake in Twitter, which he later acquired and renamed X, surged by 27% once publicly known.
Activist investors have launched a record number of campaigns against global companies in the first half of 2024, according to data from Barclays (LON:BARC). The first six months of the year saw 147 campaigns, surpassing the previous high of 143 from the first half of 2018. However, the success rate in boardroom battles has declined, with activists securing fewer board seats than in previous years.
Finally, Wall Street firms have offered varied perspectives on Twilio's financial health and strategic direction. While some analysts expect the company to re-accelerate its revenue growth, others express caution, pointing to muted growth in Twilio's Segment division and concerns over the achievability of its full-year growth guidance.
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