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Twilio Inc TWLO

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Morningstar’s Analysis

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Twilio’s Acquisition of ZipWhip to Support Customer Engagement Efforts; Maintaining $370 FVE

Nupur Balain Equity Analyst

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.

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Company Profile

Business Description

Twilio is a communications-platform-as-a-service company that allows software developers to integrate messaging and communications functionality into existing or new applications via application programming interfaces and software development kits. The firm’s Programmable Communications Cloud addresses several use cases, including Programmable Voice to make and receive phone calls, Programmable Messaging for SMS and MMS delivery, and Programmable Video, which allows developers to embed video functionality in mobile and web applications.

Contact
101 Spear Street, First Floor
San Francisco, CA, 94105
T +1 415 390-2337
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Speculative Growth
Employees 5,482

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