Twilio stock can't do anything wrong; more gains imminent

Key Points

• Shares are up nearly 50% since November and show no signs of slowing down. 
• A new CEO and bullish updates from earlier this month are doing wonders for the stock. 
• Last week saw a fresh upgrade, which will also give it fuel for further gains.

Having spent much of last year trading in a narrow range, it's looking like shares of tech stock Twilio Inc. NYSE: TWLO are finally ready to break out. The stock is up 45% since the start of November, helped no doubt by the overall risk-on sentiment that's been sweeping equity markets in the meantime, and the rally is sure to be a welcome change of pace for investors.

Last year was all about consolidation after a 90% slide from 2021's all-time high bottomed out towards the end of 2022. The stock managed to do that, and while it came close a few times last year to retesting those lows, it never did. Instead, Twilio shares started forming a consistent pattern of higher lows and higher highs that's still in place as we head into 2024. 

With the prospect of rate cuts from the Fed heating up pretty much every stock out there, and tech stocks in particular, Twilio's ready to change the theme from consolidation to recovery. 

Bullish tailwinds

Beyond the improving macroeconomic environment, the stock has its own tailwinds buoying shares, too. The news last November that activist investor Anson Funds had acquired a sizable stake raised a lot of eyebrows and would have attracted all the right kind of attention. This is the second activist investor to get involved, with Legion having already met with the Twilio board several times throughout 2023. 

Last week, we saw what was perhaps one of the first real outcomes of activist pressure, with the announcement of a new CEO. The move saw Khozema Shipchandler move from President of Twilio Communications up to the top spot, and Shipchandler wasn't slow about sharing his bullish outlook for the company. As part of the announcement, the company shared with investors that they're now expecting Q4 earnings to come in ahead of the expectations previously shared last November. 

All of this will be music to investors' ears and should be enough for many on the sidelines to want to get involved. At the same time, it can often feel a bit strange buying into a company that recently lost 90% of its value, but investors are forward-looking creatures who care less and less about the past as it recedes in the rear-view mirror.

You certainly get that feeling with Twilio, who seems to have weathered the storm and is coming out of it refreshed and revitalized. While some concerns remain about their slowing revenue growth, their revenue prints from recent quarters have been at all-time highs, while their losses on earnings per share are continuing to narrow. 

Recovery rally potential

This theme of recovery and potential was picked up on by the team over at Piper Sandler late last week when they upgraded their rating on Twilio shares from Neutral to Overweight. Analyst James Fish sees a ton of bullish catalysts on the horizon and expects to see "material upside" to many of the company's key metrics in next month's earnings report. 

His price target of $82 points to a further upside of around 15% from where shares closed on Tuesday, which isn't even the highest out there. The most bullish price target is $110 from JMP Securities, who reiterated this last quarter. And even with all the gains in the meantime, that's still suggesting there's as much as another 50% rally yet to come.  

All things considered, you can't help but feel the risk-reward setup here is particularly appealing and just keeps getting better. Even the little dip seen in shares at the start of the year will have done investors a favor, as it's helped shares cool a little from the overbought conditions they finished the year at while helping to set a fresh base around the $68 mark from where to start the next phase of the recovery rally.