Life360 Inc (ASX: 360) shares were on fire on Friday.
The location technology company's shares rocketed almost 40% following the release of its FY 2023 results.
For the 12 months ended 31 December, Life360 reported a 33% increase in revenue to US$305 million and adjusted EBITDA of US$20.6 million. The latter was well ahead of its guidance range of US$12 million to US$16 million.
The key driver of this growth was its core Life360 subscription revenue, which came in at US$200 million. This was up 52% year on year and ahead of guidance for a ~50% increase.
The good news is that management expects more of the same in FY 2024. It is guiding to revenue of US$365 million to US$$375 million and adjusted EBITDA of US$30 million to US$35 million.
The midpoint of Life360's guidance range implies revenue growth of 21% and adjusted EBITDA growth of 58%.
Life360 shares tipped to keep rising
Pleasingly for shareholders, Goldman Sachs believes that this is just the beginning of greater gains.
In response to its results, the broker has reiterated its buy rating and lifted its price target by a third to $14.20. This implies 26% upside for Life360s shares from current levels.
Commenting on the result and plans to expand into advertising, it said:
Solid subscription growth outlook cycling material price increases. FY24 EBITDA guidance appears conservative, with significant earnings growth into FY24/25E. […] Given our long-held view that Life360's subscription business remains undervalued, we view the potential advertising upside as effectively a "free" option.
The broker then concludes:
The company is now scaling margins and earnings rapidly off a low base, with attractive unit economics and potential structural profitability tailwinds on the horizon from a reduction in effective app store fees. Life360's Subscription business currently trades at a discount to global subscription app peers when adjusting for its superior growth outlook. We see scope for re-rating as Life360 demonstrates operating leverage, ongoing subscription growth and user monetisation. We are Buy rated on Life360.
