Life360 Inc (ASX: 360) shares have taken a tumble this month, caught up in the broader market selloff.
The location technology company's shares are now trading at $20.36, down 25% from their recent high of $27.18.
This sharp decline is likely to have sparked interest from investors wondering if this presents a buying opportunity.
Let's find out if analysts think that now is the time to snap up shares.
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The bull case for Life360
Goldman Sachs has been looking at the company's recent full year results and picked out a few key positives.
Firstly, it notes that international markets are performing well despite price increases, with some regions hitting a tipping point in subscriber growth. This suggests that the company's global expansion strategy is working and could provide a strong revenue tailwind in the years ahead.
Secondly, the long-term advertising and data monetisation opportunity appears larger than initially expected according to Goldman Sachs. The recent acquisition of Fantix is expected to support further growth in this segment.
In addition, user growth and conversions in the US remain solid, with upcoming product launches in 2025 and 2026 expected to drive further engagement. In particular, the company is set to introduce pet tracking features this year, followed by an elderly-focused solution in 2026—both of which could open up new revenue streams.
Finally, Goldman notes that Life360's guidance for FY 2025 revenue and adjusted EBITDA is broadly in line with consensus, but likely conservative. The company has guided for adjusted EBITDA of between US$65 million and US$75 million, which includes an $8 million investment in its upcoming pet device. This compares to the consensus estimate of US$71 million.
Are Life360 shares undervalued?
Goldman thinks that Life360's shares could have major upside potential following recent weakness.
According to the note, the broker has put a buy rating and $27.00 price target on its shares. This implies potential upside of almost 33% for investors over the next 12 months.
Commenting on its buy recommendation, Goldman said:
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 via ads. We are Buy rated on Life360.
