What if you were told that there is an ASX-listed company that operates the 32nd most downloaded smartphone app in the US?
Surely you would be curious about whether you've missed the boat on buying the stock?
Well, this isn't just a hypothetical.
The team at Firetrail Small Companies Fund recently revealed that it's backing an ASX technology stock that is on a pleasing upward trajectory.
"Life360 Inc (ASX: 360) is a market-leading family safety and communication application," read the team's memo to clients.
"The app's core features include location sharing, driving safety services, digital safety, and emergency assistance."
The app also offers safety-related insurance products for roadside assistance, travel, and identity theft.
"The application integrates tools to enhance the safety of all family members and provides parents with peace of mind that their loved ones are safe," read the memo.
"Life360 is the 32nd most downloaded app in the USA!"
Savaged by the market
The great tech sell-off of 2022 was not kind to Life360.
Between November 2021 to June 2022, the share price plunged more than 80%.
Yikes.
The market was punishing any business that was burning through cash in a quest for customer volume growth.
Fortunately, the management at the Californian software company heeded the message and promised to cut costs.
"Management [is] focused on maintaining financial discipline to deliver expanding margins as the business adds paying users," read the Firetrail memo.
"For example, the company has implemented a reorganisation of headcount and restrained hiring which will deliver US$15 million annualised savings."
The market has indeed taken notice, with the Life360 share price doubling since the June trough.
The market still not fully appreciating the turnaround
Now all that work is bearing fruit, with a significant milestone not too far away.
"Management guidance suggests Life360 will be cash flow positive by the 2023 June quarter," the memo read.
"Reaching positive free cash flow will be a key catalyst for increased investor conviction in Life360's business model."
So has the share price had its run already? Hasn't the market already priced in this remarkable turnaround?
No, say Firetrail analysts, who believe the current valuation still provides excellent value to invest.
"We believe Life360's medium-term profitability is being underestimated by the market," the memo read.
"Our conviction has increased following the repricing initiatives, greater cost control, commission savings, and progress on international expansion. Life360 currently trades on 1.5x EV/Sales multiple versus peers on 4x."
