Check out this soaring ASX stock, up 300% in 2 years, with more gains likely to come

This high-flying stock's rise may not be over according to analysts.

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Life360 Inc (ASX: 360) shares have been soaring over the last couple of years.

Thanks to its explosive revenue and earnings growth, the ASX tech stock has risen approximately 300% since this time in 2022.

This means that if you had been lucky enough to have invested $10,000 into the location technology company's shares two years ago, your investment would have grown to be worth $40,000 today.

But if you thought this ASX stock was now peaking, think again. That's the view of analysts at Bell Potter, which believe Life360 shares can keep rising from current levels.

What is the broker saying about this high-flying ASX stock?

According to a recent note, the broker has responded to Life360's first-quarter update by reiterating its buy rating with a price target of $17.75.

Based on its current share price of $14.80, this implies a potential upside of 20% for this ASX stock over the next 12 months. If this proves accurate, it would turn a $10,000 investment into approximately $12,000.

Bell Potter likes Life360 due to the resilience of its business and the potential to continue growing strongly in the future. It said:

Life360 has c.1.9m paying circles – the best measure of subscriber numbers – and managed to grow this base by 39% in 2021, 23% in 2022 and 21% in 2023 despite the disruptions associated with COVID-19. This growth shows resilience in the subscriber base and, furthermore, the potential for continued strong growth in the base with market conditions now back to normal.

In addition, the broker highlights that the ASX stock has the potential to enter and disrupt other markets. It adds:

Life360 has the potential to leverage its large and growing user base to enter new markets and disrupt the legacy incumbents. An example is roadside assistance where Life360 launched a subscription-based product called Driver Protect which disrupted the market and helped enable monetisation of its user base. Other markets Life360 could potentially enter include insurance, item & pet tracking, senior monitoring, home security and/or identity theft.

Potential re-rating

In light of the above and given the valuation of a peer, the broker believes that this ASX stock deserves to trade on higher multiples. Particularly given its plan to list on Wall Street in the near future. It concludes:

We have increased the multiple we apply in the EV/Revenue valuation from 5.5x to 6.5x given the proposed US listing and potential re-rating of the stock given the higher multiples of comps like Reddit (NYSE: RDDT). There is, however, no change in the 9.3% WACC we apply in the DCF. The net result is a 9% increase in our PT to $17.75 which is >15% premium to the share price so we maintain our BUY recommendation. Key potential catalysts for the stock include another strong quarter of paying circle growth in Q2 (April was another good month), a potential upgrade to the 2024 guidance sometime in H2 and a US listing at some stage in the next 12 months.

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. 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 Scott Phillips.

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