Amazon two-way messaging seen as opportunity for Twilio
Shares of Twilio (TWLO) are on the rise today after several analysts pointed out that Amazon’s (AMZN) launch of AWS Global SMS two-way text messaging should not be seen as a competitive threat to the company, especially since the new Pinpoint service is powered by Twilio.
AWS TWO-WAY MESSAGING
Amazon Pinpoint has launched the AWS Global SMS two-way text messaging.
Commenting on the new service, Amazon’s Randall Hunt wrote in a post to the AWS Blog: “Last week Amazon Pinpoint launched AWS Global SMS two-way text messaging and we didn’t get an opportunity to cover the launch. AWS Pinpoint users can now programmatically respond to their end-users’ text messages. Users can provision both short codes and long codes which send inbound messages to an SNS topic.”
Last night, Twilio CEO and co-founder Jeff Lawson tweeted:
“Excited that @twilio is now helping to power engagement on @AWS Pinpoint, with their launch of 2-way SMS!”
YESTERDAY’S SELLOFF OVERDONE
In a research note to investors following the news, KeyBanc analyst Brent #Bracelin argued that yesterday’s selloff in Twilio appears to be an “overreaction.”
Twilio and Amazon have had a close relationship in the past that includes a small equity stake in Twilio that Amazon acquired prior to the Twilio IPO.
Twilio has gone “all-in” on AWS and operates its global CPaaS operation on AWS’ data centers, he pointed out. Nonetheless, the analyst reiterated a Sector Weight rating on Twilio’s shares based on decelerating growth trends and margin erosion that is expected to occur in the second half of 2017.
His peer at MUFG also pointed out that while the new Amazon service may appear to be a direct competitor to Twilio’s programmable SMS Product, the company is actually helping to power engagement of the Pinpoint product.
Analyst Stephen #Bersey argued that he views this as a “broadening of the partnership” between Twilio and AWS more than direct competition. He reiterated an Overweight rating and $35 price target on Twilio’s shares.
Voicing a similar opinion, Oppenheimer analyst Ittai Kidron told investors in a research note of his own that investor fears that the new AWS two-way messaging service will compete with Twilio are incorrect.
While there is no “Powered by Twilio” branding, AWS’s new Pinpoint SMS capability is powered on the back-end by Twilio’s platform, he contends, adding that given Twilio’s presence behind the scenes, he would view the announcement as a positive for Twilio. Furthermore, the analyst said he would be an aggressive buyer on any weakness, and reiterated an Outperform rating on Twilio’s shares.
NOT COMPETING WITH VONAGE
Also commenting on the news, Needham analyst Richard Valera noted that Vonage’s (VG) shares fell yesterday due to the blog post discussing Amazon Pinpoint two-way SMS capability. However, the analyst pointed out that he believes it is “narrowly” focused on enabling user engagement campaigns for app developers and not a general purpose SMS/voice API, such as offered by Vonage. Valera reiterated a Buy rating and a $9.50 price target on Vonage shares.
In Wednesday’s trading, shares of Twilio have jumped about 7% to $29.49. Yesterday, the stock was under pressure on concerns related to Amazon’s new product, dropping almost 7%.
Vonage (VG), which also slid late in yesterday’s trading, is up 3% this morning.
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