Life360 Inc (ASX: 360) shares have been on fire again over the past 12 months.
During this time, the location technology company's shares have risen approximately 107%.
And while its shares are currently trading within a whisker of a record high, one leading broker believes there's more to come.
Life360 shares tipped to keep rising
According to a note out of Bell Potter, its analysts think that another strong result is on the way next month when Life360 releases its quarterly update.
Commenting on its expectations for the three months, the broker said:
[W]e expect another strong quarter with the following key forecasts: Revenue up 29% yoy to US$109.1m; Adjusted EBITDA up 16% yoy to US$12.8m; Global MAUs up 26% yoy to 88.6m; Total paying circles up 24% to 2.52m; ARPPC up 7% yoy to US$134.17; and AMR up 37% yoy to US$418.1m.
And while the broker expects Life360's earnings to fall quarter on quarter, this is due to an increase in sales and marketing investment. It adds:
Note we do expect adjusted EBITDA to be lower in Q2 versus Q1 – US$12.8m vs US$15.9m – after the company flagged higher sales & marketing investment in Q2 at the release of the Q1 result in May. We also expect the company to reiterate its 2025 guidance of revenue b/w US$450-480m and adjusted EBITDA b/w US$65-75m and both we and VA consensus are within these ranges at US$466.3m/US$467.0m and US$72.8m/US$72.9m.
Valuation boosted
In light of the above, this morning the broker has reiterated its buy rating on Life360's shares with an improved price target of $37.50 (from $31.25).
Based on its current share price of $33.17, this implies potential upside of 13% for investors over the next 12 months.
To put that into context, a $10,000 investment would turn into approximately $11,300 if Bell Potter is on the money with its recommendation.
Explaining its buy rating and improved valuation, the broker said:
We have rolled forward our EV/Revenue and EV/EBITDA valuations by a year given we are now past half year. We continue, however, to apply similar multiples to before – 9.5x and 55x vs 9.0x and 55x previously – given the unchanged positive outlook and potential for a reasonably large acquisition given the recent convertible note raising.
There is no change in the 8.5% WACC we apply in the DCF. The net result is 20% increase in our price target to $37.50 which has mostly been driven by increases in the relative valuations. The PT is a 13% premium to the share price and we maintain our BUY recommendation with the upcoming Q2 result a potential catalyst.
