After a horror night on the Nasdaq, Life360 Inc (ASX: 360) shares are taking another tumble on Wednesday.
At the time of writing, the location technology company's shares are down 10% to $41.28.
This appears to have been driven by concerns over slowing monthly active user (MAU) growth.
But could this be an overreaction? Bell Potter thinks so.
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Should you buy crashing Life360 shares?
Bell Potter notes that Life360 delivered another strong quarterly result this week.
And while the company outperformed expectations, the market has focused on its MAU growth, which was slower than anticipated. However, Bell Potter points out that this was deliberate and should not be cause for alarm. The broker explains:
3Q2025 revenue and adjusted EBITDA of US$124.5m and US$24.5m were 3% and 26% ahead of our forecasts. The key metrics of total paying circles, AMR and ARPPC were all in line with or slightly above our forecasts while MAU was the one miss at 91.6m versus our forecast of 94.2m. On the call, CEO Lauren Antonoff said there had been "an intentional shift in our marketing to focus paid media on users who are more likely to retain and convert".
In response to the update, the broker has upgraded its estimates for the near term. It advised:
We have upgraded our revenue forecasts in 2025, 2026 and 2027 by 1%, 11% and 11% and now forecast 2025 revenue of US$480m which is close to the middle of the guidance range. We have also upgraded our adjusted EBITDA forecasts by 7%, 4% and 5% and now forecast 2025 adjusted EBITDA of US$86m which again is around the middle of the guidance range. Note we only include Nativo from 2026 onwards and assume it generates 2026 revenue and adjusted EBITDA of c.US$60m and US$3m. We also assume the acquisition is funded by half cash and half scrip.
Buy the dip
According to the note, the broker has retained its buy rating on Life360's shares with an improved price target of $52.50 (from $47.50).
Based on its current share price, this implies potential upside of 27% for investors over the next 12 months.
Commenting on its buy recommendation, the broker said:
There are no changes in the key assumptions we apply in any of our valuations and we continue to apply multiples of 12x and 62.5x in the EV/Revenue and EV/EBITDA valuations and an 8.3% WACC in the DCF.
The combination of the forecast changes and time creep has driven an 11% increase in our PT to A$52.50 which is a 15% premium to the share price so we retain our BUY recommendation. In short, we are not perturbed by the slower-than-expected MAU growth in Q3 when it was an intentional shift in marketing spend and also when there was a corresponding increase in the conversion rate. As CEO Lauren Antonoff said, "the strategy is working".
