On Wednesday, TD Cowen adjusted its outlook on Twilio (NYSE:TWLO), a cloud communications platform, by reducing its price target to $65 from $72. The firm has decided to maintain a Market Perform rating on the company's stock. The adjustment follows Twilio's operational review of Segment, a customer data platform it acquired.
The review led Twilio to retain Segment instead of selling it, and implement several changes aimed at boosting profitability. This includes a reduction in force (RIF), commonly understood as layoffs. Additionally, Twilio has announced an increase in its fiscal year 2024 buyback program by $2 billion and provided new guidance for FY24.
According to the new guidance, Twilio's top-line revenue projections appear to be more optimistic than what analysts had anticipated, but its operational profit forecast is slightly below expectations. TD Cowen noted that the decision to keep Segment and the subsequent strategic changes might be seen as a letdown by some, as there was no value realization from a potential sale of the asset.
The firm's analyst pointed out that despite the changes and the enhanced buyback program, the retention of Segment without a sale might be viewed as a missed opportunity for value creation. As a result, TD Cowen believes it is appropriate to continue with a Market Perform rating and has adjusted the price target to reflect these developments.
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