Twilio reiterated as large-cap software top pick by BTIG
Investing.com -- BTIG analyst Nick Altmann reiterated Twilio, Inc. as his top large-cap software pick in a recent note to clients, raising the price target to $315 while maintaining a Buy rating on the stock.
Altmann noted that Twilio shares have climbed approximately 16% over the past 1.5 months, driven by anticipation of S&P 500 inclusion, which was officially announced on October 1, and rising enthusiasm around personal AI agents. The analyst said recent meetings with management strengthen his confidence in Twilio's positioning as the communications infrastructure layer for the agentic layer.
1. Strong Growth Momentum Across All Channels: Second-quarter organic growth modestly accelerated to 16.7%, with strength broad-based across channels, go-to-market motions, and software add-ons, according to the BTIG note. Messaging grew 28%, voice growth accelerated above 20%, and software add-ons increased more than 25% year-over-year. The analyst expects momentum to continue and currently models 16.1% reported growth and 11.8% organic growth for the third quarter. Altmann said he will pay close attention to voice growth acceleration, traction with the new Conversations layer, and the impact of the new Twilio Console on multi-product adoption.
2. Margin Improvements Gaining Less Attention: Gross margin and gross profit have become less frequent topics in recent investor meetings, largely because gross profit growth continues to outpace organic revenue growth while operating and free cash flow margins continue to improve, the analyst noted. The primary focus is expected to remain on organic growth, though Altmann sees upside to his 48% gross margin estimate. In an upside scenario, he believes compression could be limited to approximately 150 basis points, allowing gross profit growth to continue outpacing organic revenue growth.
3. Premium Valuation Justified: Altmann said a premium valuation to peers is warranted as Twilio offers both offensive and defensive positioning in the AI era with fundamentals continuing to improve. The raised price target of $315 is based on approximately 34 times enterprise value to calendar year 2027 estimated free cash flow.