Artificial Intelligence (AI) Stocks Are Going Parabolic and They’re Easy to Buy Right Now

Although shares Twilio (TWO 1.81%) lagged the broader market in 2024 with a gain of 19% compared to the 23.6% gain recorded S&P 500 Index index, a closer look at the recent share price movement will tell us that investors have become incredibly bullish on the company as of late.

Twilio shares in particular have risen sharply since reporting third-quarter results on Oct. 30, jumping 28% over the past week thanks to set of numbers better than expected and improved guidance for the year. A parabolic move means a company’s stock price rises rapidly over a short period of time (similar to the right side of a parabolic curve). The good news is that Twilio may be able to maintain its newfound momentum thanks to artificial intelligence (AI).

Let’s take a look at how AI is playing a central role in accelerating Twilio’s growth and could present a strong long-term growth opportunity for the company.

Twilio’s AI-focused efforts are positively impacting customer growth and spending.

Twilio’s third-quarter revenue rose 10% year over year to $1.13 billion, topping the consensus estimate of $1.09 billion. The company also reported net income rose 76% year-over-year to $1.02 per share. , which significantly exceeded the consensus estimate of $0.86 per share. Twilio management turned out to be the icing on the cake as the company now expects to end 2024 with organic revenue growth of 7.5% to 8%, up from previous growth expectations of 6% to 7%.

Moreover, Twilio management increased its adjusted operating income estimated range of US$700 million to US$710 million, up from previous US$650 million to US$675 million. The company also expects to generate $650 million to $675 million in free cash flow this year.

Twilio’s desire to control its costs and the growing popularity of its new features using AI Helping your customers get more out of their customers are the reasons for accelerating revenue growth and amazing revenue growth. Twilio offers a cloud-based communications platform through which its clients can connect with their customers through various channels such as text, voice, chat, video, email and more.

Company deals with AI integration into its cloud platform since last year to enable it to reach its customers more efficiently and help them capture a larger share of their wallets. The good news is that her strategy now appears to be paying off. On my last conference call with incomeTwilio CEO Josema Shipchandler noted:

More customers are turning to Twilio because we deliver higher ROI by delivering demonstrable results that help customers increase their revenue and reduce costs. By integrating artificial intelligence with our core suite of products, we can automate capabilities, improve productivity, and enable personalization at scale.

Shipchandler also said that Twilio has a “concerted focus on implementing artificial intelligence and machine learning across the Twilio platform” and provided several examples of how its customers are benefiting from increased adoption of its AI-focused offerings. It’s no surprise that Twilio’s AI-focused offerings are gaining traction as the communications platform-as-a-service grows in size. The CPaaS market served by Twilio is expected to grow from $12 billion this year to $121 billion in 2034, according to Future Market Insights.

The research firm notes that the adoption of artificial intelligence tools in the CPaaS space will play a central role in driving this market’s tremendous growth over the next decade. This likely explains why Twilio is now seeing an increase in its customer base. The company ended the third quarter with 320,000 active customer accounts, up from 306,000 in the same quarter last year.

More importantly, the company reported a net dollar growth rate of 105% last quarter. A score greater than 100% means Twilio customers have either increased their use of the company’s solutions or are purchasing additional solutions from the company. This metric compares spending by Twilio customers in a given quarter to spending by the same customers in the same quarter the previous year.

It’s worth noting here that Twilio’s net dollar growth rate improved from 101% in the same quarter last year. Thus, thanks to artificial intelligence, Twilio could be at the beginning of a healthy growth curve, which is why analysts have also raised their growth expectations.

TWLO revenue estimates for the current fiscal year data on YCharts.

Outstanding earnings growth and valuation make this stock a no-brainer.

Analysts expect Twilio to end 2024 with revenue of $3.67. earnings per share (EPS)which is almost 50% more than last year.

TWLO EPS Estimate for Current Fiscal Year data on YCharts. EPS = earnings per share.

As the chart above shows, earnings forecasts for the next two years have been raised recently, with analysts expecting Twilio to achieve double-digit net income growth in 2025 and 2026. In addition, the company’s earnings are projected to grow at a 20% annual rate. for the next five years. However, don’t be surprised to see higher numbers due to increased customer spending on AI solutions.

All this makes Twilio top AI stocks buy now, given that the company trades at just 22 times forward earnings, a deep discount compared to the average US tech sector earnings multiple of 49. If the market decides to reward Twilio with a higher earnings multiple in the future thanks to its AI-driving growth. it could deliver outstanding returns to investors over the long term, given the rate at which its net income is likely to grow.

As such, there’s a good chance that Twilio’s stock market rally will continue, so investors should consider buying the stock before it soars higher.