A Look at Twilio (TWLO) Valuation Following AI Growth and Bullish Analyst Upgrades

Twilio (TWLO) shares have grabbed attention after the company announced significant progress in its AI-powered communications business. Recent moves in the stock come as voice AI revenue grew nearly 60% over the past year, reflecting momentum from new product innovation and a generally upbeat outlook for the business.

See our latest analysis for Twilio.

Twilio’s stock price has surged over the past quarter, fueled by its expanding AI initiative and upbeat earnings forecasts. This renewed optimism helped drive a 22.8% 90-day share price return, while the company’s 1-year total shareholder return reached 24.1%. This highlights that growth momentum is building as the business pivots to new markets and technologies.

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Still, with the stock rallying on analyst upgrades and a wave of AI-driven optimism, investors are now asking whether Twilio is truly undervalued or if the market has already factored in all the expected growth. Is this a fresh buying opportunity, or is future upside already reflected in the current price?

Most Popular Narrative: 6% Undervalued

Twilio’s most widely followed narrative sets its fair value at $138.04, which is above the recent close at $129.69. This places Twilio’s shares in a favorable light compared to where the market is currently pricing them, creating a clear point of debate over the stock’s next move.

Growing adoption of AI-powered communications and automation is fueling incremental demand for Twilio's programmable infrastructure and platform products (for example, ConversationRelay and conversational intelligence), expanding the company's addressable market and driving higher-margin revenue growth. This supports future revenue and net margin expansion.

Read the complete narrative.

Want to know the financial engine powering this bullish view? The real action is in the earnings transformation and the valuation multiple Wall Street assigns to future profits. Curious about the projections and tensions hiding beneath this upbeat narrative? There is more to these numbers, so unpack the story behind the headline figures in the full analysis.

Result: Fair Value of $138.04 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, margin pressure from low-margin messaging and increased regulatory demands could still derail Twilio's growth narrative if not carefully managed.

Find out about the key risks to this Twilio narrative.

Another View: What About Our DCF Model?

While many see Twilio as undervalued based on its fair value narrative, our SWS DCF model paints a more cautious picture. It suggests Twilio is actually trading above its estimated fair value of $119.39. This raises a practical question for investors: are optimistic growth assumptions already priced in, or is there hidden upside to be found?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Twilio for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 914 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Twilio Narrative

If you want to look beyond these viewpoints or simply trust your own analysis, it only takes a few minutes to create your own perspective. Do it your way.

A great starting point for your Twilio research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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