Now could be a good time to buy Life360 Inc (ASX: 360) shares.
That's the view of analysts at Goldman Sachs, which think the ASX 200 tech stock could deliver market-beating returns over the next 12 months.
What is the broker saying about this ASX 200 tech stock?
Goldman notes that Life360's chief financial officer, Russell Burke, has made an appearance at the Communacopia + Technology Conference 2024.
The broker was pleased with what it heard at the event, summarising a few key takeaways. It said:
Management discussed: (1) Ample runway for subscription business in the US; (2) International expansion progressing well with new markets ahead; (3) Advertising strategy on track, significant LT opportunity; (4) 25% EBITDA margins could be brought forward; and (5) Considering product adjacencies and M&A.
Digging deeper into the tech stock's US subscription business, the broker said:
Organic user acquisition has remained ~70-80% of total new users, demonstrating 360's network effects and helping explain the strength in southern/midwestern states where 360's penetration is highest. The company believes that MAU penetration in US coastal states can approach similar levels (~25%) over time, creating significant headroom for recent MAU growth rates to be sustained. Conversion from free-to-paid returning to levels seen before the late-2022 price increases has been a key driver of strength in paid subs (in addition to MAU growth), and 360 believes recent subs momentum is sustainable.
The location technology company's international expansion is also looking positive according to Goldman Sachs. It adds:
Management noted that Membership rollout in the UK and Australia has exceeded expectations, with revenue growth >50% since introduction. With the International infrastructure largely set up in London, and agreements with third party vendors that can cover Europe, management noted that the Nordics and Northern European countries are likely to be next for rollout (with minimal product tweaks required).
Finally, Goldman believes that the ASX 200 tech stock could bring forward its EBITDA target. It said:
Management reiterated its commitment to profitable growth, aided by strength in the high margin Subscription business and Advertising revenue beginning to flow. US$1bn revenue and 25% Stat. EBITDA margin remain the mid-term targets, though management noted that recent strength in revenue growth alongside disciplined cost management could see the EBITDA margin target achieved ahead of schedule.
Market-beating returns
In response to the above, Goldman has reaffirmed its buy rating and $19.75 price target on Life360's shares.
This implies potential upside of 16% for investors over the next 12 months.
