What It Means For Twilio That Lyft Went Shopping For A Second Vendor

Lyft, which has been a customer of Twilio Inc TWLO, has added Nexmo as a potential alternative CPaaS [Communications Platform as a Service] provider for its SMS, voice and phone number needs, and may use multiple vendors, William Blair’s Bhavan Suri said in a report.

Maintaining an Outperform rating on Twilio, Suri commented that any pressure on the shares due to this news would offer a “buying opportunity.” He added that favorable industry dynamics and a strong business model would enable Twilio to generate base revenue growth of 44 percent in 2017 and 33 percent in 2018, higher than the group average.

Concerns Remain

Lyft adding Nexmo as a potential alternative is a negative for Twilio. Suri added, however, that customers moving to lower-priced vendors would be more of a concern, if those vendors offered the same quality of service, “which we do not believe to be the case in this situation.”

Related Link: This Analyst Sees Nearly 30% Upside In Twilio Shares

The analyst mentioned that many companies actively searched for less expensive options. The may try other vendors and “ultimately return to Twilio given its better quality and performance, especially for its voice offering, which benefits from its extensive carrier connections.”

Twilio isn't competing on the basis of pricing. Rather, the company is positioning itself as the leader with “the most innovative, feature-rich, and reliable platform,” Suri pointed out.

Image: Raido, Flickr