It hasn't been a great start to the year for growth shares. A number of high flying shares have had their wings singed like Icarus in 2022.
But while that is disappointing, it could also be a buying opportunity for investors. Here's what analysts are saying about these growth shares:
Life360 Inc (ASX: 360)
The first ASX share to look at is Life360. It is a location-based services provider based in San Francisco, United States with 33 million+ monthly active users. Its shares have lost approximately half of their value since the start of the year.
The team at Bell Potter believe this is a buying opportunity and remain very positive on its long term outlook. So much so, the broker has a buy rating and $10.00 price target on its shares. This is just over double where its shares trade at today.
Bell Potter commented: "Life360 had already pre released most of the key metrics in the 2021 result which were all very strong. These included subscription revenue growth of 48%, total revenue growth of 40%, paying circles growth of 38% and, by our estimation, average revenue per paying circle (ARPPC) growth of 20%. The company ended the year with a cash c.US$94m after adjusting for the Tile acquisition and the only debt is convertible notes of c.US$8m."
"We have updated each valuation used in the determination of our price target for the forecast changes as well as market movements and time creep. We have also removed the premium in EV/Revenue valuation and increased the WACC in the DCF from 8.4% to 8.7% due to the uncertainty around any impact on Tile and also the potential US listing and any associated raising. The net result is a 26% decrease in our PT to $10.00 which is still a large premium to the share price so we keep the BUY."
Nitro Software Ltd (ASX: NTO)
Another ASX share to look at is Nitro Software. It is a software company that is aiming to drive digital transformation in organisations around the world. Its key solution is the Nitro Productivity Suite, which provides integrated PDF productivity and electronic signature tools to customers.
Goldman Sachs is very positive on the company and notes that it has a huge total addressable market to grow into in the future. The broker currently has a buy rating and $2.60 price target on its shares. This is almost double the latest Nitro share price of $1.36.
Its analysts commented: "Nitro Software is a global enterprise software challenger in a US$34bn TAM across PDF, e-signing and workflows. Nitro operates in large, underpenetrated markets supported by structural growth tailwinds including remote work, enterprise digitisation and e-signing adoption."
"We estimate Nitro can increase its TAM penetration from 0.15% to 1.4% by FY40 implying 9x uplift to Nitro's current revenue base. In our view, this is achievable given (1) Nitro's core competitive advantages in price, ease-of-use and customer service; (2) strong underlying market growth; and (3) large market opportunity supporting Nitro's growth in addition to established incumbents."
