It pains me to say it, but my wife and I opted not to get a cloud-based app.
Here’s the thing. We’re having a new heating/air conditioning system installed in our home.
This is state of the art in ductless heat-pump technology. Trust me, the Mitsubishi mini split system isn’t cheap.
Adding $400 to have the Kumo Cloud app wouldn’t have broken the bank. And we were looking forward to being able to control all four comfort zones from our mobile devices.
Unfortunately, the app gets dismal reviews on Apple Inc. (AAPL)‘s App Store, scoring 1.8 out of 5 stars.
The reviews were so bad we briefly thought about switching brands, only to find that the number two in the space also has a totally dreadful app as well.
Clearly, these guys need help plugging into what I call the “App Economy,” one set to be worth more than $377 billion.
Now then, after enduring several warm summers, my wife and I had been talking about adding air conditioning to our home in the East Bay hills overlooking San Francisco Bay.
But we were concerned about piling onto our energy bills. Not only that, the problem with central heat or air is it covers the whole house.
That means you waste a lot of energy warming or cooling many rooms not in use.
Enter Mitsubishi’s cutting-edge mini split system. We are having four of these heat-pump zones installed, each with its own remote. All four of the zones are in different rooms and are connected to a compressor.
Keeping it simple here, the system converts hot air outside in the summer into cold air inside and does the reverse in the winter.
Since many mornings here start off cold and foggy before the high heat rolls in, we expect to get a lot of use out of this system.
We actually debated extensively about whether to pay more to have access to a cloud-based mobile app that requires a special communication node installed into each zone. In the end, we decided we didn’t want to pay extra for an app that is widely panned.
That’s because my wife and I are both pretty app-centric. I track my nightly sleep with two apps and use one on Apple Watch to track my activity. When I park my car, I use the ParkMobile app, and I scan my business receipts and email them to my MBA-wife using CamScanner.
Trust me, I’m just scratching the surface here…I also use Tile to keep track of my wallet and glasses and Uber Technologies Inc. (UBER) to get rides. I have apps to control my main thermostat, monitor my surveillance, and check the weather.
The “App Economy” Is a Veritable Gravy Train for Savvy Tech Investors
Goldstein Research says the Android mobile app market is growing at 15.6% a year. The firm pegs the market at $337.5 billion in 2024, not counting a conservative forecast of $40 billion for Apple users.
Enter Twilio Inc. (TWLO). This fast-moving, growth-centric leader already powers some of the biggest mobile and cloud-based firms in high tech.
Make no mistake, this is a firm with a killer client list…
From today’s cutting-edge web-only firms to tech industry veterans, Twilio has racked up a very broad list of clients that need robust and easy-to-use apps.
Going public in 2016, Twilio has the building blocks users must have to integrate voice calling, text messaging, and video. They also integrate web and mobile chat services.
Just take a look at Twilio client PayPal Holdings Inc. (PYPL). The fintech leader provides services in more than 200 countries and handles 26 currencies. PayPal execs know that a full-featured app serves as a crucial gateway for its 286 million global accounts.
Airbnb, one of the most valuable private tech firms on the planet, gave Twilio the mandate to build a secure and simple app that can handle communications, reservations, rental facts and photos, and payment processing.
The online file sharing service Box Inc. (BOX) uses Twilio to deliver secure communications to 240,000 clients. Box does this through two-factor authentication needed to make sure those accessing files stored in the cloud are authorized to do so.
Two Converging Streams of Revenue
While Twilio reaps strong gains from signing up new customers, it also profits from more than a million independent app developers who use the firm’s tools to create specialized apps with a broad set of features.
These folks know that there’s no need to write massive amounts of code from scratch when Twilio has already created the key building blocks that make a great app.
Often times, these developers need only assemble the various Twilio APIs (Application Programming Interfaces) and can be up and running within a week.
Twilio also offers the most comprehensive suite of cloud-based communications APIs, with a vast library of resources, thanks to that million-strong independent developer base.
In October 2018, the company moved to fill out its franchise with a $2 billion buyout of SendGrid, which has deep expertise in email management. With 74,000 customers, SendGrid has processed 1.5 trillion emails and was profitable for eight straight quarters before the merger.
As a result, the combined firm now has an addressable market of $66 billion. SendGrid accounts for $11 billion of that amount.
Add it all up, and you can see that Twilio is a great play on the App Economy. Even better, the stock is currently out of favor.
It sold off in late July even though sales and earnings met Wall Street forecasts. I believe that was a gross overreaction that came while the Street was freaking out about possible slowing global growth.
That clipped about 26% off the stock’s value, giving aggressive investors a nice new entry point.
Bear in mind that from the day the market rebounded, last Dec. 24, until the stock hit its recent closing high, on July 26, TWLO was up 98%. It beat the S&P 500 in the period by 241%.
But don’t worry. This market leader is bound to resume its upward march once again.
Just look at the numbers. Twilio has been growing sales by 55% a year, meaning they double roughly every 16 months.
With that kind of momentum, it may be only days until this tech powerhouse once again becomes a market-crushing winner.
Cheers and good investing,
Michael A. Robinson