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As technology stocks sold off Friday, Twilio Inc. shares were bucking the trend in the wake of an upgrade at Argus Research.
Argus analyst Jim Kelleher thinks Twilio
TWLO,
will be an artificial-intelligence winner, one reason he boosted his rating on the stock to buy from hold and set a $72 price target, 16% above current levels.
“We see AI as a key accelerant for Twilio’s business as clients seek to make their customer-communications tools more capable and more efficient,” Kelleher wrote.
He’s encouraged by trends elsewhere in the technology ecosystem that suggest customers increasingly could have the budget room for Twilio’s offerings, which include messaging, voice and email tools for customer communications.
“Results from major media companies such as Meta, Alphabet and Amazon appear to show the beginnings of recovery in digital advertising spending,” Kelleher wrote. “In this environment, we look for Twilio’s clients to increase spending on customer engagement platforms and business tools enabling cloud-hosted telephone contact, texting and other means of direct-to-consumer messaging and connection.”
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In his view, “the market for customer engagement products has steadied and should begin to accelerate from here.”
Kelleher also flagged cost-cutting progress at Twilio, writing that the “leaner” company has improved its margins. “While Twilio is far from GAAP profitability, GAAP losses appear to be coming down,” he noted, as the company just racked up two straight quarters with adjusted operating margins upwards of 10% for the first time since it went public.
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Twilio shares were up 2.3% late in Friday’s session, while the Nasdaq Composite Index was down 0.6%. The shares have gained 27% so far in 2023, while the S&P 500
SPX
has increased 16% and the Nasdaq has risen 30%.
