As befitting a company focused on growth, Twilio (TWLO) has not been shy on the acquisition front. Earlier this week, the company announced the latest addition to its roster – the 5th meaningful deal of the past 18 months.
Twilio disclosed it is scooping up business texting platform Zipwhip for $850 million, in a deal consisting an equal mix of cash and equity. The new addition will boost the company’s messaging capabilities and brings to the table more than 30,000 customers. Zipwhip also has a wealth of direct connections to U.S., Canadian and European carriers. The deal is anticipated to close later this year.
Jefferies analyst Samad Samana thinks there are two reasons the deal is a good one for the cloud communications platform.
For one, while Twilio can do toll-free texting, a business must rent a new toll-free number from it. Using their existing business lines and toll-free numbers, Zipwhip allows businesses to two-way text/chat with consumers.
Secondly, Samana notes how Twilio can benefit from Zipwhip’s dealings with the large US carriers.
“TWLO has historically relied on third-party aggregators to connect with these carriers,” the 5-star analyst said. “These direct integrations strengthen TWLO’s carrier relationships and could potentially be beneficial to TWLO’s core business in the long run.”
The move was also applauded by Oppenheimer’s Ittai Kidron, who makes similar points to Samana.
“We view the acquisition as another offensive move for Twilio aimed at expanding its capabilities and, equally important, broadening its carrier relationships globally (similar to its Syniverse partnership and ValueFirst acquisition),” Kidron said.
Twilio also stands to benefit from “better pricing rates, improved spam control, and higher throughput,” which the analyst thinks should raise the communication platform’s standard.
Kidron also notes that for sales and marketing use cases, Zipwhip can seamlessly be put to work together Twilio’s email API platform Sendgrid.
All in all, the general view on Wall Street is that Twilio stock is poised to surge ahead over the coming months. Based on 14 Buys vs. 2 Holds, the stock has a Strong Buy consensus rating. The average price target clocks in at $451.33, implying 12-month share appreciation of 51%. (See TWLO stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
