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Twilio (TWLO) Intends to Buy Customer Data Start-Up Segment

Twilio TWLO is planning to acquire cloud-based customer data infrastructure start-up — Segment — for $3.2 billion, Forbes reported last Friday citing two anonymous sources familiar with the development. Forbes further revealed that the deal hadn’t finalized until Friday afternoon.

Segment offers a cloud-based platform that helps businesses collect, clean, and control customer data. Last April, the company raised $175 million in a Series D round of funding, which valued it at $1.5 billion, according to the Forbes report. The business magazine also mentioned that the company had been on a hunt for takeover offers.

We believe the acquisition would enhance Twilio’s capabilities in the cloud-based communications platform space. The buyout will also help Twilio gain a significant portion of Segment’s customer base. According to the Forbes’ report, Segment has worked with more than 20,000 businesses including Intuit, FOX and Levi's.

If the deal is locked, this would be Twilio’s third acquisition this year. In July, it bought the Internet of things (IoT) platform — Electric Imp — for an undisclosed amount in an effort to boost one of its fastest-growing IoT platform business units. In January, the company acquired Brazilian start-up — Teravoz — which provides virtual PBX and telephonic services to small- and mid-sized companies.

Twilio Inc. Price and Consensus

Twilio Inc. Price and Consensus
Twilio Inc. Price and Consensus

Twilio Inc. price-consensus-chart | Twilio Inc. Quote

Acquisitions Boost Growth

Apart from the aforementioned buyouts, Twilio has made other few strategic acquisitions in the past. In October 2018, it acquired SendGrid in an all-stock deal worth $2 billion — the company’s largest-ever acquisition. With this acquisition, Twilio strengthened its omni-channel communications capabilities by enhancing the company’s Programmable Communications Cloud software, which allows developers to embed voice, messaging, video and authentication capabilities.

During the same year in September, the company bought its long-term business partner, Ytica, as part of efforts to enhance its customer service application platform, Twilio Flex. In 2017, it acquired Beepsend, enhancing the Twilio Super Network’s capabilities.

Furthermore, Twilio acquired proprietary WebRTC media processing technologies in 2016, boosting its Programmable Video capabilities. The company’s acquisition of Authyin February 2015 helped offer cloud-based API to seamlessly-embedded two-factor authentication and phone verification into any application.

Focus on Customer Engagement

Twilio has been focusing on enhancing its communications platform continuously, which helps boost its revenues over the long run. A sturdy uptick in Twilio’s Engagement Cloud offerings as well as e-mail with the inclusion of SendGrid is a key catalyst.

Strong uptake of Flex is likely to be a significant contributor to the company’s revenue stream gradually. Twilio's new product line, comprising Twilio Pay and Autopilot, which is also witnessing a solid acceptance, will help the company expand its market share in the upcoming period.

Being a provider of cloud communications platforms to corporations, Twilio is the missing link between businesses and the cloud. Additionally, as more and more companies are shifting to the cloud, Twilio looks poised to ride this growth trend over the long run.

Zacks Rank and Key Picks

Twilio currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader technology sector include Zoom Video Communications ZM, salesforce.com, inc. CRM and Aspen Technology, Inc. AZPN, all sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom, Salesforce and Aspen is currently pegged at 25%, 18%, and 15.5%, respectively.

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