The tech sector is having a tough finish to the week.
While this is disappointing, analysts at Bell Potter believe the selloff could have presented investors with an opportunity to buy one rapidly growing ASX 200 tech stock at a great price.
Which ASX 200 tech stock?
According to a note out of Bell Potter this morning, its analysts are recommending investors snap up Life360 Inc (ASX: 360) shares.
Particularly given their belief that the location technology company will deliver a strong half year result next month and could even upgrade its guidance. It said:
Life360 is scheduled to report its 1H2024 result on Friday, 9th August and our key forecasts are (all % changes are y-o-y): Revenue up 17% to US$163.2m; Statutory EBITDA loss before listing costs of US$(9.6)m; Global monthly active users up 32% to 71.9m; Total paying circles up 24% to 2.01m; Average revenue per paying circle up 5% to US$125.69; and Annualised monthly revenue (excluding hardware) up 20% to US$299.6m.
Note the company announced via a media release in mid June that it had reached 2.0m paying circles so rather than this being the focus we expect it to be more on revenue and EBITDA and, for instance, what advertising revenue was generated (if disclosed). We see some chance of an upgrade to the 2024 guidance for underlying statutory EBITDA (currently US$(8-13)m vs BPe US$(10.9)m) but not much chance for revenue (currently US$365-375m vs BPe US$369m).
Big returns
In light of the above and after rolling forward its valuation by a year, the broker has reaffirmed its buy rating and lifted its price target to $19.00 (from $17.75).
Based on its current share price, this implies potential upside of approximately 16% for this ASX 200 tech stock over the next 12 months. It concludes:
We have rolled forward our EV/Revenue valuation by a year – so that 2025 is now the base – given we are now in 2H2024. We now apply a 6.0x multiple to forecast revenue compared to 6.5x previously. There are no changes in our DCF assumptions which are a 9.3% WACC and 5.0% TGR. The net result is a 7% increase in our PT to $19.00 which is >10% premium to the share price so we maintain our BUY recommendation. We see the upcoming H1 result as a potential catalyst for the share price – due to both a strong result and potential guidance upgrade – and then stronger advertising revenue in Q3 as a further potential catalyst at the result in November.
