Goldman Sachs Trims Twilio's Price Target To $38

Goldman Sachs cut its price target on Twilio Inc (NYSE: TWLO) shares modestly to $38 from $39, as it slightly lowered estimates given the company’s profitability target missed the brokerage view.

“Our price target is derived from a weighted average of our DCF & EV/sales (70 percent) and our M&A (30 percent) analyses. Our 10-year DCF assumes a 12 percent discount rate and a 14x terminal FCF multiple (unchanged). Our EV/sales analysis uses a 7.0x multiple on our CY18 sales estimate (unchanged),” analyst Heather Bellini wrote in a note.

Twilio raised its FY16 total revenue guidance at the midpoint by $14 million to $268 million–$270 million, driven by higher base revenue and by $0.07 on non-GAAP EPS to ($0.21–0.23) from ($0.28–$0.30). The company also lifted its operating margin guidance about 230bps to (6–7 percent) from (8–9 percent).

The increased guidance was on the back of strong third-quarter results, which included revenue growth of 62 percent to $71.5 million and non-GAAP EPS of ($0.04) compared to the Street at $64.4 million and ($0.09). Goldman, which has a Neutral rating on the stock, was expecting revenue/EPS of $71.0 million/($0.04).

Base revenues rose 75 percent to $64.1 million versus consensus of $56.4 million and compares to second quarter 2016 growth of 84 percent.

Shares of Twilio closed Thursday's trading at $32.60. In the pre-market hours Friday, the stock is up 6.23 percent at $34.60.