Life360 Inc. (ASX: 360) shares were caught up in last week's sell-off across software stocks, as investors worried that artificial intelligence could disrupt established platforms.
While this is disappointing, according to Bell Potter, the pullback could be an opportunity rather than a warning sign.
In a broker note this morning, Bell Potter outlined five reasons why it believes Life360 shares stand out as a buy at current levels.
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1. Life360 is not traditional software
Bell Potter argues that Life360 should not be viewed as a conventional software company that faces meaningful AI disruption risk. It said:
Life360 is an app rather than software company so faces little risk of AI disruption given the ecosystem it has developed over >15 years.
2. The FY25 result is largely known
Another positive highlighted by Bell Potter is the lack of uncertainty around the upcoming result. The broker explains:
The 2025 result is already largely known following the update provided in late January and showed strong growth in all key metrics.
This includes revenue growth of more than 30% and a sharp improvement in profitability, which reduces the risk of negative surprises when results are released.
3. Consensus forecasts look reasonable
Bell Potter believes expectations for FY26 earnings are achievable and not overly aggressive. Its analysts note:
VA consensus for 2026 adjusted EBITDA is c.US$132m (vs BPe US$130m) and we expect the guidance to be at least equal to this level.
Bell Potter notes that these forecasts already assume higher sales and marketing spend and include the lower-margin Nativo business.
4. User growth could accelerate
User growth remains a key driver of Life360's long-term value, and Bell Potter sees scope for further upside. The broker explains:
The one outlook statement for 2026 already provided is MAU growth of 20% which implies absolute growth of c.19m.
Bell Potter also highlights that its own forecasts assume a conservative conversion rate from free users to paying subscribers, which leaves room for upside if engagement remains strong.
5. The valuation now looks attractive
Finally, Bell Potter believes the recent sell-off has made Life360 shares look compelling on a valuation basis. It said:
Life360 is now trading on 2026 and 2027 EV/Adjusted EBITDA multiples of c.31x and c.21x which looks value for forecast growth of c.45% in both periods.
Despite trimming its price target to reflect broader weakness in tech stocks, Bell Potter still sees substantial upside.
Should you buy Life360 shares?
Bell Potter has retained its buy rating on Life360 shares with a trimmed price target of $41.50.
Based on its current share price of $25.68, this implies upside of more than 60% over the next 12 months.
While sentiment around ASX software stocks has been volatile, Bell Potter believes Life360's business model, growth outlook, and valuation make it an attractive buy this week. It concludes:
Key focus at the result next month will be the 2026 guidance which, as mentioned, we expect to be at least consistent with VA consensus. The guidance already provided for MAU growth implies continued strong top line growth but note we only assume a modest increase in the adjusted EBITDA margin from c.18.4% in 2025 to 19.8% in 2026 due to an assumed increase in S&M and also the lower margin of Nativo.
