Markets

Why Twilio's Stock Is Soaring Today

What happened

Shares of cloud-based communications and collaboration technologist Twilio (NYSE: TWLO) traded 7.1% higher at 2:40 p.m. EDT on Friday, goosed by a bullish analyst note.

So what

Cowen & Co. analyst Derrick Wood reiterated his outperform rating on Twilio shares, which indicates that he expects the stock to beat the market in the near term. Wood lifted his price target from $230 to a Street-high $260 per share, 17% above Thursday's closing price. The analyst said that his proprietary checks on Twilio's clients and markets are "very bullish" and that the company is in the early days of a huge long-term growth cycle.

A red charting arrow smashed upward through a blue brick wall

Image source: Getty Images.

Now what

The analyst's arguments in Twilio's favor echo my own analysis from earlier this week. Twilio is an exciting growth stock with a vanishingly slim share of an enormous target market. The company isn't worried about earnings and cash flow at this point, structuring its business model to maximize revenue growth. Profits will have to wait until later, when the user base has reached an appropriately massive size. This is growth-stock investing 101.

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Anders Bylund owns shares of Twilio. The Motley Fool owns shares of and recommends Twilio. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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