Analyst Note
| Nupur Balain |We view narrow-moat Twilio’s intent to acquire ZipWhip for $850 million in a favorable light as we believe ZipWhip’s platform rounds out Twilio’s messaging products by providing businesses with new avenues to drive customer engagement. ZipWhip is a business messaging provider that facilitates seamless communication between businesses and customers via SMS. Touting over 30,000 customers worldwide, ZipWhip has demonstrated impressive revenue growth of over 400% during the last three years. The deal is an equal combination of cash and stock and is expected to close in the latter part of 2021. Twilio has long remained a leader in the communications-platform-as-a-service, or CPaaS, space and continues to invest in augmenting its offerings to provide a holistic communications experience. We expect this acquisition to be top line and gross-margin-accretive in the long run, supported by increasing scale in the messaging business as well as by ZipWhip’s strong relationships with network carriers. We are maintaining our $370 fair value estimate as we await additional details on expected future synergies. We view shares as currently undervalued and see a potential buying opportunity for investors.