Life360 Inc (ASX: 360) shares are having a poor start to the week.
At the time of writing, the location technology company's shares are down 10% to $30.33.
Why are Life360 shares sinking?
This decline appears to have been driven by profit taking from some investors following a very strong gain on Friday in response to a trading update.
For example, despite today's sizeable pullback, Life360 shares remain up approximately 14% since this time last week.
Is this a buying opportunity?
The team at Bell Potter is likely to see this pullback as an opportunity for investors.
That's because the broker remains very positive on the company following its update, which outperformed expectations. In response, it said:
Life360 provided a Q4 and 2025 update which was ahead of both the guidance and our forecasts: Year end MAU of 95.8m (vs BPe 93.5m) comprising 50.6m in the US (vs BPe 49.5m) and 45.3m international (vs BPe 44.0m); Year end paying circles of 2.83m (vs BPe 2.80m) comprising 2.00m in the US (vs BPe 1.97m) and 0.83m international (vs BPe 0.81m); 2025 revenue expected to be b/w US$486-489m (vs guidance US$474-485m and BPe US$480m); and 2025 adjusted EBITDA expected to be b/w US$87-92m (vs guidance US$84-88m and BPe US$86m).
The company also provided one outlook statement for 2026 which was MAU growth of 20% which implies absolute growth of c.19m users to around 115m at year end.
Time to buy
According to the note, Bell Potter has reaffirmed its buy rating with a trimmed price target of $45.00.
Based on its current share price, this implies potential upside of 48% for investors over the next 12 months.
The broker explained that its price target reduction reflects lower tech valuations and a higher weighted average cost of capital. It explains:
We have reduced the multiples we apply in the EV/Revenue and EV/EBITDA valuations from 12x and 62.5x to 10x and 52.5x given the pull back in tech valuations over recent months. We have also increased the WACC we apply in the DCF from 8.3% to 8.5% which has been driven by an increase in the risk-free rate from 4.25% to 4.5%. The net result is a 14% decrease in our price target to $45.00 which is >15% premium to the share price so we maintain the BUY recommendation.
The next potential catalyst for the stock is the release of the 2025 result in early March where we expect strong 2026 guidance to be provided with, for instance, revenue growth expected to be >30% and adjusted EBITDA growth >40%.
