Twilio Inc. TWLO has become a shining star in 2024, with its stock surging an impressive 98.9% over the past six months. This performance far exceeds the Zacks Internet - Software industry’s 13.4% gain and the S&P 500’s 10.3% rise during the same period.

6-Month Price Return Performance

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But with such a meteoric rise, many investors are left wondering: Is Twilio’s stock still a worthwhile investment, or has it reached its peak? Here’s why the stock continues to shine and is a compelling buy right now.

Twilio’s Key Indicators Signal Room for Upward Momentum

Despite its significant rally, Twilio remains attractively valued. Its forward 12-month price-to-sales (P/S) ratio of 3.6 is well below the Zacks Computer and Technology sector’s average of 6.57. This discount suggests that Twilio is still undervalued, presenting an enticing entry point for value-conscious investors.

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Additionally, TWLO stock’s technical indicators reflect positive momentum. Trading above its 50-day moving average, Twilio shows a strong near-term bullish trend that could drive further gains.

50-Day Moving Average Signals Bullish Trend

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Twilio’s Dominance in Customer Engagement and AI Integration

Twilio has firmly established itself as a leader in the customer engagement and communications market. Its platform powers real-time, personalized experiences for businesses worldwide, setting the standard for innovative customer interactions.

A major growth driver is Twilio’s investment in artificial intelligence (AI). Products like Twilio Verify and Voice Intelligence use AI to automate and personalize customer interactions, enabling businesses to operate more efficiently and improve customer satisfaction. As the demand for AI-driven solutions grows, Twilio is well-positioned to benefit.

The company’s Segment business, which consolidates customer data from multiple touchpoints, is gaining traction. By offering deeper insights and enabling highly targeted marketing campaigns, Segment has the potential to become a significant revenue contributor. This focus on data-driven solutions differentiates Twilio in a crowded market and aligns it with future trends in customer engagement.

Twilio’s Robust Financial Performance Highlights Strength

Twilio’s financial results underscore its dominance. In the third quarter of 2024, the company reported a 10% year-over-year revenue increase, paired with a 76% jump in non-GAAP earnings per share (EPS). Management expects fourth-quarter revenues to grow by 9.5%–10.5%, with non-GAAP EPS projected to climb 10.5%–16.5%.

Twilio’s solid balance sheet adds to its appeal. At the end of the third quarter of 2024, the company had $2.70 billion in cash, cash equivalents and short-term marketable securities. Over the first three quarters of the year, Twilio generated $608 million in operating cash flow, demonstrating its financial strength and operational efficiency.

Shareholder returns are another bright spot. Since initiating its $3 billion share repurchase program in February 2023, Twilio has already repurchased $2.7 billion worth of its shares. This commitment to returning value to shareholders underscores the company’s confidence in its long-term prospects.

Twilio’s Competitive Edge in a Challenging Market

In a highly competitive space, Twilio faces stiff competition from tech giants like Cisco Systems CSCO, Microsoft MSFT and Amazon AMZN, all of whom offer similar communication solutions. Cisco's Webex Connect, Microsoft’s Azure Communication Services and Amazon's AWS Communication Developer Services are formidable rivals, but Twilio has managed to carve out a unique space for itself.

Twilio’s developer-friendly platform and extensive application programming interface (API) ecosystem have made it a preferred choice for companies looking to build custom communication solutions. Its ability to offer highly customizable communication tools, alongside its extensive global reach in more than 180 countries, gives Twilio a competitive edge. In contrast, competitors often offer more regionalized or standardized services.

Twilio’s API-first approach has attracted a broad range of clients, from startups to large enterprises, solidifying its market position. While its competitors benefit from broader cloud service offerings, Twilio’s focus on communications allows it to innovate quickly and cater directly to the needs of its clients. This agility is crucial as Twilio adapts to the fast-evolving landscape of customer engagement technology.

Conclusion: Buy TWLO Stock for Now

Twilio’s recent rally may have turned heads, but it’s far from overvalued. With an attractive valuation, a strong financial foundation and innovative AI-driven products, Twilio is well-positioned to continue its upward trajectory.

Its leadership in customer engagement, coupled with its strategic investments in data analytics and AI, makes Twilio a standout in the tech sector. For investors looking to capitalize on a company that’s leading the future of communications, Twilio remains a compelling buy.

TWLO stock has a favorable combination of Zacks Rank #1 (Strong Buy) and a Growth Score of A. The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 (Buy) and a Growth Score of A or B offer solid investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

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