Amazon is setting up to eat Twilio’s lunch in the cloud messaging space with the quiet launch of two-way text messaging through Amazon Web Services (AWS) Pinpoint.
“AWS Pinpoint users can now programmaticaly respond to their end-users’ text messages. Users can provision both short codes and long codes (10-digit phone numbers) which send inbound messages to an SNS topic.”
Twilio provides a variety of cloud-based telecom, texting, and user-authentication services – operating entirely through the Amazon Web Services platform. Up until May, for example, Uber in-app notifications primarily used Twilio SMS architecture – previously accounting for 12 percent of $TWLO revenue until the ridesharing giant announced a shift away from Twilio.
The company also manages the two-factor login for Intuit’s tax service, as well as an internal messaging system for the Coca-Cola Co.
Amazon’s announcement sent Twilio stock down over 6% in trade on Tuesday.
Unfortunately for Twilio, which went public at $15 and hit a high of $64 last year before enduring a rocky 2017, there are several fatal flaws in their business model – namely compressed margins and competition.
Via Yahoo Finance:
TWLO is losing money. Still. In fact, its losses are widening. FY14 net loss was $26.76 million. FY15 net loss was $38.9 million. FY16 loss was $41.3 million. So far this year, through two quarters, TWLO stock has a net loss of $21.32 million.
Free cash flow for TWLO stock has also been negative: $18.4 million in FY14, $20.5 million in FY15, and $24.26 million in FY16. So far this year it is negative $10.9 million.
Every TWLO stock bull will point to revenue growth, and show that it tripled from FY14 to FY16, and has a run-rate increase of 35% this year. Yeah, and I’ll point out that despite that tripling of revenue, R&D and SG&A spend also tripled.
Somehow this loser company is trading at a $2.8 billion valuation. That’s ridiculous. It comes on the heels of the Twilio May earnings report, which announced that Uber defected from using Twilio’s platform, accounting for 12% of revenues. It also lost WhatApp.
In April, Trip Chowdhry of Global Equities Research predicted Twilio’s demise:
TWLO has zero chance to survive against the ‘Scale-out’ pricing structure of AWS-Connect,” he said. “If history is any indication, AWS-Connect will resort to about two to three price cuts within 12 months, [and] TWLO has zero capacity to match the AWS-Connect Scale-out pricing. Pretty much TWLO is toast.”
Somebody get the paddles ready, this doesn’t look good.
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TWLO: One of the many losers picked by OA
In case you are ignorant of the facts, the CEO of Twilio actually tweeted as appended below:
“Excited that @twilio is now helping to power engagement on @AWS Pinpoint, with their launch of 2-way SMS!” @Jeff Lawson
Either you are a heavy shorter of the stock or purely negligent in your reporting. Either way, you are dead wrong.
Picking something for a pop doesn’t translate to bring bullish for life.