Twilio Analyst Weighs In On $850M Zipwhip Buyout

On Monday, Twilio Inc TWLO announced an $850 million deal to acquire Zipwhip, a company that helps enable businesses to use their existing toll free business phone numbers to text customers.

Deal Makes Sense: Bank of America analyst Daniel Bartus said Tuesday the Zipwhip deal makes a lot of sense for Twilio, and investors can expect more deals in the near future given the company’s $5.7 billion cash cushion.

“In our view, the technology is highly complementary as it enhances Twilio’s core Messaging, aligns well with Customer Engagement efforts, and strengthens Twilio’s Super Network,” Bartus wrote in a note.

Reports suggest Zipwhip’s business grew more than 400% from 2017 to 2020. While the deal is expected to be only modestly accretive to Twilio’s revenue and gross margin, Bartus said it will help Twilio achieve further vertical integration. In addition, Bartus said Twilio will benefit from Zipwhip’s relationships with direct carriers and its more than 30,000 customers. Zipwhip will also help Twilio cut costs associated with B2C messaging, and its products have use cases that are complementary to Twilio’s network, Bartus said.

Looking Ahead: Twilio management also reiterated its second-quarter revenue guidance as part of the announcement, which Bartus said doesn't include added revenue from Twilio’s ValueFirst acquisition in the first quarter or its Zipwhip deal. The Zipwhip merger is expected to be completed by the end of the year.

Bank of America has a Buy rating and $460 price target for Twilio.

Benzinga’s Take: For now, it seems Bartus is expecting Twilio’s spending spree to continue. As long as the deals enhance the company’s value and are fairly priced, these acquisitions will help boost Twilio’s already impressive sales growth and should be welcome news for investors.