Life360 Inc (ASX: 360) released its quarterly results today, and despite earnings coming in well ahead of analysts' expectations, the shares are taking a beating.
As of mid-morning, the shares are down 8.7% to $20.39, inflicting more pain on shareholders who have seen the stock fall from as high as $50.79 over the past year.
I am one of those shareholders, and as of this morning, I'm underwater on my Life360 investment.
I'm a long-term holder though, and I'd gladly buy more at these depressed prices.
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Why I'm still bullish on Life360 shares
There are several reasons why I'm keen on the stock, but it's best expressed by a graph in the company's ASX releases today, which shows monthly active users growing strongly every quarter from 2020 to the present.
The company now has just shy of 108 million active users globally, up 5.3 million over the quarter, and quarterly revenue grew 40% year on year to US$174.1 million.
The company also had US$465 million in cash on hand, and has a share buyback under way, with US$180.6 million available for more purchases.
While the quarterly numbers are all well and good, the number that interests me most at the moment is the company's price-to-earnings (P/E) ratio, which currently sits at 27.8 times.
While this would be considered high for many companies, for a high-growth technology company, it's definitely on the low side.
Consider the P/E ratios of Wisetech Global Ltd (ASX: WTC) at 58, Xero Ltd (ASX: XRO) at 85.1, or Pro Medicus Ltd (ASX: PME) at 80.9.
Given Life360's track record of strong revenue and user growth, it's not unreasonable to believe it should be valued in a similar range to these high growth companies.
The company is also developing an advertising business to go along with its geolocation offering, with revenue up 250% year on year to US$25.4 million.
Experts believe Life360 shares are cheap
In terms of how analysts saw the quarterly results, RBC Capital Markets said monthly active user growth was in line with expectations, while EBITDA of US$34.6 million was 11% up on what they were forecasting.
The broker has a price target of $31.75 on Life360 shares, which would be a 55.7% increase if achieved.
On the outlook for the full calendar year, Life360 expects total monthly active user growth of 17% to 20% and revenue of US$665 to US$681 million, narrowed from US$650 to US$685 million.
The company also narrowed its EBITDA guidance from US$130 to US$140 million to US$132 to US$138 million.
