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  1. Home
  2. / Investing
  3. / Technology

Vonage 'Betterfied' with Nexmo's Voice API

Baird analysts initiate coverage as Vonage's Nexmo strengthens its role in global messaging.
By ANDERS KEITZ Sep 14, 2016 | 03:45 PM EDT
Stocks quotes in this article: VG, TWLO, BABA

Baird Equity Research analysts are looking like geniuses right now, giving Vonage (VG) an Outperform rating just a day ahead of Nexmo rolling out its voice application programming interface ("API"). 

The firm initiated coverage on Vonage on Tuesday and is bullish on the stock, establishing a price target of $8. VG shares were up more than 4% during midday trading Wednesday, at around $6.14.

Baird's coverage comes as Vonage's Nexmo continues to "betterfy" its cloud communications capabilities to take on market darling Twilio (TWLO) .

Nexmo, which is the second-largest Communications Platform as a Service ("CPaaS") behind Twilio, launched a next-generation voice application programming interface ("API") on Wednesday. This API enables developers to build communications customized for any app, website or voice-based communications system. The company already established an API for messaging, but the voice API is what Vonage has been waiting for.

"With the new voice API, Nexmo adds to its strength in global messaging and pioneering work with chat apps, creating a formidable and complete set of APIs that further solidify Vonage's leadership in the two most dominant forms of communication today, voice and messaging," said CEO Alan Masarek in a statement. Vonage completes 15 billion minutes of global voice traffic annually to landline and mobile phones.

Grab, the leading ride-hailing platform in Southeast Asia, is using the Voice API to communicate with customers in several countries. With other clients, like Gett, Thomson Reuters and Aliababa (BABA)  already using Nexmo's SMS API, Vonage has an impressive built-in clientele that could add the Voice API.

Vonage is charging $0.0107 per minute for outbound calls, $0.0041 to $0.0169 per minute for inbound calls and $0.75 to $1.97 per month for toll free. Nexmo's prices are relatively in line, or even lower, than Twilio's.

Baird analyst William Power sees further upside for Vonage as a Unified Communication as a Service ("UCaaS") provider; considering the $50 billion market, Power expects VG UCaaS growth of 20%. (UCaaS refers to a service model where providers deliver telecom or communications software applications or services -- think Nexmo).

As for the CPaaS side of business, a.k.a. Nexmo, the Baird analyst said there is "significant" opportunity as it opens a "new growth vertical, differentiating itself from the other UCaaS leaders."

"Even using significant discounts to the nearest public comps, we view the sum-of-the-parts valuation as attractive," wrote Power in a research note Tuesday. For the third quarter, the Baird analyst is forecasting revenue of $247.7 million. For the 2017 fiscal year, Power is expecting $1 billion in revenue, split evenly between business and consumer.

So, thanks to the Nexmo acquisition, if investors are looking to get on the cloud-communications bandwagon, Vonage could present more upside than it's pricier competitor, Twilio. 

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TAGS: Investing | U.S. Equity | Technology | Telecom Services

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