Why the Life360 (ASX:360) share price could be cheap despite rising 240% in 2021

It may not be too late to buy Life360’s shares…

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The Life360 Inc (ASX: 360) share price has been one of the best performers on the Australian share market in 2021.

Since the start of the year, the family safety app maker’s shares have risen a whopping 240%.

Where next for the Life360 share price?

The good news for investors is that one leading broker believes the Life360 share price is cheap despite its epic gains this year.

According to a note out of Bell Potter, the broker has retained its buy rating and lifted its price target on the company’s shares to $14.75.

Based on the current Life360 share price of $13.16, this implies potential upside of 12% for investors over the next 12 months.

Why are its shares cheap?

Bell Potter believes the Life360 share price is cheap in comparison to the price investors are willing to pay for a recently listed peer in the United States.

It commented: “Last week a reasonable comp for Life360, Nextdoor, listed on the NYSE […] The company also released its Q3 results and upgraded its 2021 guidance to revenue b/w US$185- 188m (previous guidance US$181m) and adjusted EBITDA US$(47-48m) (previous guidance US$(49m).”

“The [Nextdoor] stock is now trading on an EV/Revenue multiple of c.23x based on the mid-point of the upgraded 2021 guidance and this compares to a multiple of c.13x for Life360 based on our 2021 revenue forecast of US$111m (which is around consensus).”

“The multiple of Nextdoor is therefore significantly higher than that of Life360 even though, in our view, Life360 is a higher quality company given it generates most of its revenue through subscription whereas Nextdoor generates most of its revenue through advertising. The multiple of Nextdoor therefore makes Life360 look cheap and is relevant given Life360 is planning a secondary listing in the US sometime next calendar year,” it concluded.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Life360, Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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